Federal Reserve Chair Jerome Powell Testifies Before The Senate Amidst Tensions With The Trump Admin

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During Wednesday's Senate Banking Committee hearing, Federal Reserve Chair Jerome Powell delivered his testimony.

Transcript

00:00I'm the chair of the Federal Reserve Jerome Powell on the semi-annual monetary policy report to

00:05Congress. Chair Powell, thank you for your testimony today and you have five minutes.

00:08Thank you. Chairman Scott, Ranking Member Warren, and other members of the committee,

00:12I appreciate the opportunity to present the Federal Reserve's semi-annual monetary policy report.

00:18The Federal Reserve remains squarely focused on achieving our dual mandate goals of maximum

00:23employment and stable prices for the benefit of the American people. Despite elevated uncertainty,

00:28the economy is in a solid position. The unemployment rate remains low and the labor

00:33market is at or near maximum employment. Inflation has come down a great deal but has been running

00:38somewhat above our 2% longer run objective and we are attentive to the risks to both sides of our

00:44dual mandate. I will review the current economic situation before turning to monetary policy.

00:51Incoming data suggests that the economy remains solid. Following growth of 2.5% last year,

00:57GDP was reported to have edged down in the first quarter, reflecting swings in net exports that

01:03were driven by businesses bringing in imports ahead of potential tariffs. This unusual swing has

01:09complicated GDP measurement. Private domestic final purchases, or PDFP, which excludes net exports,

01:16inventory investment, and government spending, grew at a solid 2.5% rate. Within PDFP, growth of

01:23consumer spending moderated, while investment in equipment and intangibles rebounded from weakness

01:29in the fourth quarter. Surveys of households and businesses, however, report a decline in sentiment

01:34over recent months and elevated uncertainty about the economic outlook, largely reflecting trade policy

01:40concerns. It remains to be seen how these developments might affect future spending and investment.

01:45In the labor market, conditions have remained solid. Payroll job gains averaged a moderate

01:52$124,000 per month in the first five months of the year. The unemployment rate, at 4.2% in May,

02:01remains low and has stayed in a narrow range for the past year. Wage growth has continued to moderate

02:07while still outpacing inflation. Overall, a wide set of indicators suggest that conditions in the labor

02:13market are broadly in balance and consistent with maximum employment. The labor market is not a

02:19source of significant inflationary pressures. The strong labor market conditions in recent years

02:25have helped narrow long-standing disparities in employment and earnings across demographic groups.

02:32Inflation has eased significantly from its highs in mid-2022, but remains somewhat elevated relative

02:38to our 2% longer-run goal. Estimates based on the Consumer Price Index and other data indicate that

02:44total PCE prices rose 2.3% over the 12 months ending in May and that, excluding the volatile food and

02:53energy categories, core PCE prices rose 2.6%. Near-term measures of inflation expectations have moved up over

03:02over recent months. As reflected in both market and survey-based measures, respondents to surveys of

03:07consumers, businesses, and professional forecasters point to tariffs as a driving factor. Beyond the next

03:13year or so, however, most measures of longer-term expectations remain consistent with our 2% inflation

03:18goal. Our monetary policy actions are guided by our dual mandate to promote maximum employment and

03:26stable prices for the American people. With the labor market at or near maximum employment and

03:33inflation remaining somewhat elevated, the Federal Open Market Committee has maintained the target range

03:38for the federal funds rate at 4.25% to 4.5% since the beginning of the year. We have also continued to

03:44reduce our holdings of Treasury and agency mortgage-backed securities and, beginning in April, further slowed

03:50the pace of this decline to facilitate a smooth transition to ample reserve balances. We will

03:56continue to determine the appropriate stance of monetary policy based on the incoming data, the

04:01evolving outlook, and the balance of risks. Policy changes continue to evolve and their effects on the

04:08economy remain uncertain. The effects of tariffs will depend, among other things, on their ultimate

04:13level. Expectations of that level, and thus of the related economic effects, reached a peak in April and have

04:19since declined. Even so, increases in tariffs this year are likely to push up prices and weigh on economic

04:25activity. The effects on inflation could be short-lived, reflecting a one-time shift in the price level.

04:32It is also possible that the inflationary effects could instead be more persistent.

04:37Avoiding that outcome will depend on the size of the tariff effects, on how long it takes for them to pass

04:42through fully into prices, and ultimately on keeping longer-term inflation expectations well anchored.

04:48The FOMC's obligation is to keep longer-term inflation expectations well anchored and to prevent a

04:54one-time increase in the price level from becoming an ongoing inflation problem. As we act to meet that

04:59obligation, we will balance our maximum employment and price stability mandates, keeping in mind that

05:04without price stability, we cannot achieve the long periods of strong labor market conditions

05:09that benefit all Americans. For the time being, we are well positioned to wait to learn more about

05:15the likely course of the economy before considering any adjustments to our policy rate. To conclude,

05:21we understand that our actions affect communities, families, and businesses across the country.

05:26Everything we do is in service to our public mission. We at the Fed will do everything we can

05:31to achieve our maximum employment and price stability goals. Thank you. I look forward to your questions.

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