‘We Remain Committed To Bringing Inflation Back Down’: Fed Chair Powell Delivers Opening Testimony

3 months ago

During a House Financial Services Committee hearing on Wednesday, Federal Reserve Chair Jerome Powell gave his opening testimony.

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Transcript

00:00Chairman McHenry, Ranking Member Waters, and other members

00:03of the Committee, I appreciate the opportunity

00:05to present the Federal Reserve's semiannual monetary

00:08policy report.

00:10The Federal Reserve remains squarely focused

00:12on our dual mandate to promote maximum employment

00:15and stable prices for the benefit of the American people.

00:18Over the past two years,

00:19the economy has made considerable progress toward

00:22the Federal Reserve's 2 percent inflation goal,

00:25and labor market conditions have cooled while remaining strong,

00:29reflecting these developments, the risks to achieving our

00:32employment and inflation goals are coming into better balance.

00:36I will review the current economic situation before

00:39turning to monetary policy.

00:42Recent indicators suggest that the U.S. economy continues

00:45to expand at a solid pace.

00:47Gross domestic product growth appears to have moderated

00:50in the first half of this year, following impressive strength

00:53in the second half of last year.

00:55Private domestic demand remains robust, however,

00:58with slower but still solid increases in consumer spending.

01:02We've also been moderate, we've also seen moderate growth

01:05in capital spending and a pickup

01:07in residential investment so far this year.

01:10Improving supply conditions have supported resilient demand

01:13and the strong performance of the U.S. economy

01:15over the past year.

01:17In the labor market, a broad set of indicators suggest

01:21that conditions have returned to about where they stood

01:23on the eve of the pandemic, strong but not overheated.

01:26The unemployment rate has moved higher but was still

01:29at a low level of 4.1% in June.

01:33Payroll job gains averaged 222,000 jobs per month

01:37in the first half of the year.

01:39Strong job creation over the past couple

01:41of years has been accompanied by an increase in the supply

01:44of workers, reflecting increases

01:46in labor force participation among individuals age 25 to 54

01:51and a strong pace of immigration.

01:53As a result, the jobs to workers gap is well down from its peak

01:57and now stands just a bit above its 2019 level.

02:02Nominal wage growth has eased over the past year.

02:04The strong labor market has helped narrow long-standing

02:08disparities in employment and earnings

02:09across demographic groups.

02:13Inflation has eased notably over the past couple of years

02:16but remains above the committee's longer run goal

02:18of 2%.

02:19Total PCE prices rose 2.6% over the 12 months ending in May.

02:23Core PCE prices, which exclude the volatile food

02:26and energy categories, also increased 2.6%.

02:30After a lack of progress toward our 2% inflation objective

02:35in the early part of this year,

02:37the most recent monthly readings have shown modest

02:39further progress.

02:42Longer-term inflation expectations appear

02:44to remain well above the committee's goal of 2%.

02:47Inflation expectations appear to remain well anchored,

02:50as reflected in a broad range of surveys of households,

02:53businesses, and forecasters, as well as measures

02:56from financial markets.

02:57Our monetary policy actions are guided by our dual mandate

03:02to promote maximum employment and stable prices

03:05for the American people.

03:07In support of these goals,

03:08the committee has maintained the target range

03:10for the federal funds rate at 5.25% to 5.5% since last July.

03:14After having tightened the stance

03:16of monetary policy significantly

03:17over the previous year and a half.

03:21We have also continued to reduce our securities holdings.

03:23At our May meeting, we decided to slow the pace

03:26of balance sheet runoff starting in June,

03:28consistent with the plans released previously.

03:31A restrictive monetary policy stance is helping

03:34to bring demand and supply into better balance

03:37and to put downward pressure on inflation.

03:41The committee has stated

03:42that we do not expect it will be appropriate

03:43to reduce the target range for the federal funds rate

03:46until we have gained greater confidence

03:49that inflation is moving sustainably toward 2%.

03:53Incoming data for the first quarter

03:54of this year did not support such greater confidence.

03:57The most recent inflation readings, however,

04:00have shown some modest further progress.

04:02And more good data would strengthen our confidence

04:04that inflation is moving sustainably toward 2%.

04:08We continue to make decisions meeting by meeting.

04:11We know that reducing policy restraint too soon

04:14or too much could stall or even reverse the progress

04:17that we've seen on inflation.

04:18At the same time, in light of the progress made both

04:23in lowering inflation and in cooling the labor market

04:25over the past two years,

04:27elevated inflation is not the only risk we face.

04:30Reducing policy restraint too late

04:32or too little could unduly weaken economic activity

04:36and employment.

04:38In considering adjustments to the target range

04:40for the federal funds rate,

04:41the Committee will continue its practice

04:43of carefully assessing incoming data and their implications

04:46for the evolving outlook, the balance of risks,

04:49and the appropriate path of monetary policy.

04:51Congress has entrusted the Fed

04:53with the operational independence that is needed

04:55to take a longer-term perspective in the pursuit

04:58of our dual mandate of maximum employment and price stability.

05:02We remain committed to bringing inflation back

05:03down to our 2% goal

05:05and to keeping longer-term inflation expectations

05:08well anchored.

05:10Restoring price stability is essential

05:11to achieving maximum employment

05:13and stable prices over the long run.

05:15Our success in delivering on those goals matters

05:18to all Americans.

05:19I'll conclude by emphasizing that we understand

05:21that our actions affect communities, families,

05:24and businesses across the country.

05:26Everything we do is in service to our public mission.

05:29Thank you.

05:30I look forward to your questions.

05:31Well, thank you, Chair Powell.

‘We Remain Committed To Bringing Inflation Back Down’: Fed Chair Powell Delivers Opening Testimony

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