Jerome Powell Testimony Live: All about Fed Chair US Congress speech

• Jerome Powell delivers his bi-annual testimony in front of congressional lawmakers.
• Fed Chair responds to questions after delivering the Semi-Annual Monetary Policy Report.
• US Dollar, stock markets and all asset classes on the move with Powell’s words.  
  

Jerome Powell, Chairman of the Federal Reserve System (Fed), is about to testify before the Banking, House and Urban Affairs Committee in the US Senate on Thursday, starting at 14:00 GMT. It is the second day of Powell's testimony in the US Congress after speaking in front of the Financial Services Committee in the House of Representatives. US senators will ask questions Chairman Powell on a variety of topics, including financing conditions, inflation outlook and future monetary policy steps.

On Wednesday, during the hearing in the US House, entitled “The Federal Reserve’s Semi-Annual Monetary Policy Report”, the Federal Reserve Chairman reiterated the commitment of the Fed toward their 2% inflation target, acknowledging it is still far from being met. Jerome Powell balanced this take with some dovish remarks, expressing the need to moderate the pace of interest rate hikes and hinting that "raising interest rates can be painful and slow demand." The US Dollar sold off in reaction, with the US Dollar Index (DXY) coming back to 102 and the EUR/USD reaching levels close to 1.10. 

These are the main takeaways from Powell's Q&A sessions in the US Senate:

We expect labor market to continue to gradually cool

"We expect the labor market to continue to gradually cool."

"We also expect inflation to move down this year."

"Strong majority of committee believes two more rate hikes before end of year."

"Decision last week was to move more slowly."

"We will do what it takes to get inflation down to 2% over time."

"Staff has been briefing governors on capital proposal, but still there are changes, even this morning."

"We will wait for final version to really go through and evaluate the proposals."

We are close to where the destination is on rates

"One reason labor demand and supply is getting into better balance is the strong rebound in immigration."

"There may be a bit more tightening in the pipeline from banking stress than there would be otherwise."

"We are close to where the destination is on rates."

"It makes sense to move at a careful pace."

"We don't want to overdo it."

We have not seen much progress in services inflation

"Headline inflation has come down, but that's largely from energy and food prices not principally a function of monetary policy."

"We are seeing progress in supply chains."

"We have not seen much progress in services inflation."

"We still have a long way to go."

"I dont think monetary policy is becoming less effective."

"There's no consensus agreement on how long it takes monetary policy to affect economy, but a year and change is not a bad way to look at it."

"We have identified banks that have a higher concetration of commercial real estate, working with them."

Will be appropriate to raise rates again this year, perhaps two more times

"FOMC broadly feels it will be appropriate to raise rates again this year and perhaps two more times."

"We kept rates on hold to give ourselves more time to make decisions."

"A strong majority of the committee feels there is a little further to go with rate hikes."

"It would be perfect, but no guarantee, that labor market can get into better balance without unemployment rising."

"There's a clear need to strengthen supervision and regulation for banks of SVB's size."

 

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These are the main takeaways from Powell's Q&A session on Wednesday in the US House:

We don't see rate cuts any time soon

"We don't see a lot of evidence of additional credit tightening on top of what had been seeing, but keeping our eyes out for that."

"As we get closer to our destination we have slowed down, to avoid the mistake of going too far."

"People on committee overwhelmingly believe one or two more rate hikes will be appropriate."

"Housing activity has kind of hit a bottom now."

"Strength in housing now is new buyers; market seems to be improving."

"If economy performs as expected, 2/3 of committee think it will be appropriate to raise rates twice more this year."

"We think we are within a couple of rate hikes of the level we need to be."

"We want to be confident inflation will continue to move down."

"We don't see rate cuts any time soon."

"Test for any rate cut is confidence that inflation is moving down."

"Fed projections at the median has some rate cuts next year, but will depend on the economy."

"Inflation has proven more persistent than expected."

"Rate cuts will have to wait until confident inflation moving down to 2%."

While raising rates can be painful, it slows demand

"This economy is very strong."

"A very strong labor market is driving the economy."

"Inflation is moving down gradually."

"The thing that troubles people is really inflation."

"While raising rates can be painful, it slows demand."

"We want to get back to price stablity, want to get back to that place where inflation is low enough that people don't think about it."

"We are on a journey to get to price stability, we have quite a ways to go but we are making progress."

Status of Dollar as world's reserve currency is very important

"The status of the Dollar as world's reserve currency is very important."

"Fed's inflation and employment mandates are perfectly equal."

"We should focus heavily on inflation, as we are far from that goal now."

"We will return to 2% inflation."

"We are moving the balance sheet back down, but won't go back to a scarce reserve level."

"It is important that the balance sheet not just grow with every cycle."

"Demand for reserves can be volatile."

"We don't want to be in the same position as last reduction cycle."

There are still significant labor shortages

"There is an expectation that ratio of job openings to unemployed people will come down."

"That's a way for labor market to become less tight without having unemployment rise."

"There are still significant labor shortages."

"Data is suggesting a gradual cooling in labor market, but we still have significant excess demand over supply."

"Housing supply and demand are getting back into line."

"Housing inflation will come down significantly this year, next year."

We are very far from our inflation target

"Our banks are very strongly capitalized."

"We are very far from our inflation target."

"We are strongly committed to getting inflation back down to 2% over time."

"We learned from Silicon Valley that there is a need for stronger supervision, regulation for banks of that size."

"There are situations in which we need to be more forceful, not in all situations though."

May make sense to move rates higher, at more moderate pace

"Level for rates and speed of rate hikes are separate."

"Early in process, speed was important, less so now."

"It may make sense to move rates higher, at a more moderate pace."

"We are moderating the pace, much as you might decelerate a car as near destination."

"Regulation should be transparent, consistent, not too volatile."

"Capital is central to banking regulation."

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The section below was published at 12:40 GMT on Wednesday, before Federal Reserve Chairman Jerome Powell's testimony in the US House.

Jerome Powell's prepared testimony for delivery to the House Financial Services Committee, published ahead of the event, showed that the Fed Chairman will repeat that nearly all FOMC participants expect it will be appropriate to raise interest rates "somewhat further" by the end of the year. 

"My colleagues and I understand the hardship that high inflation is causing, and we remain strongly committed to bringing inflation back down to our 2% goal," Powell will tell the House committee. "Inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go."

Regarding the policy outlook, Powell is set to reiterate that they will continue to make policy decisions on a meeting by meeting basis, based on incoming data, implications for the outlook and the balance of risks.

In the semi-annual Federal Reserve Monetary Policy Report released on Friday, the Fed acknowledged that the outlook for fed funds rate is subject to considerable uncertainty, while reiterating that inflation in core services ex-housing has not shown any signs of easing. Although the Fed left its policy rate unchanged at the range of 5-5.25% following the June policy meeting as expected, the hawkish revision to the terminal projection rate in the Summary of Economic Projections suggested that policymakers see the need to for additional tightening later this year. According to the CME Group FedWatch Tool, markets are pricing in a stronger than 70% probability of a 25 bps hike in July.

Members of House will question Powell about the policy outlook and its potential impact on the economy. The banking crisis in March unveiled the negative impact of high interest rates on financing conditions and heightened fears over an economic slowdown. Uncomfortably high inflation and the strong labor market, however, should allow the US central bank to stay focused on reinstating price stability. 

 

---

The section below was published at 12:40 GMT on Wednesday, before Federal Reserve Chairman Jerome Powell's testimony in the US House.

Jerome Powell's prepared testimony for delivery to the House Financial Services Committee, published ahead of the event, showed that the Fed Chairman will repeat that nearly all FOMC participants expect it will be appropriate to raise interest rates "somewhat further" by the end of the year. 

"My colleagues and I understand the hardship that high inflation is causing, and we remain strongly committed to bringing inflation back down to our 2% goal," Powell will tell the House committee. "Inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go."

Regarding the policy outlook, Powell is set to reiterate that they will continue to make policy decisions on a meeting by meeting basis, based on incoming data, implications for the outlook and the balance of risks.

In the semi-annual Federal Reserve Monetary Policy Report released on Friday, the Fed acknowledged that the outlook for fed funds rate is subject to considerable uncertainty, while reiterating that inflation in core services ex-housing has not shown any signs of easing. Although the Fed left its policy rate unchanged at the range of 5-5.25% following the June policy meeting as expected, the hawkish revision to the terminal projection rate in the Summary of Economic Projections suggested that policymakers see the need to for additional tightening later this year. According to the CME Group FedWatch Tool, markets are pricing in a stronger than 70% probability of a 25 bps hike in July.

Members of House will question Powell about the policy outlook and its potential impact on the economy. The banking crisis in March unveiled the negative impact of high interest rates on financing conditions and heightened fears over an economic slowdown. Uncomfortably high inflation and the strong labor market, however, should allow the US central bank to stay focused on reinstating price stability. 

About Jerome Powell (via Federalreserve.gov)

"Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028."