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

  • 2 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.

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