5 takeaways from Federal Reserve Chair Jerome Powell’s appearance Tuesday before the US House Financial Services Committee:
Powell declined to comment specifically on the potential for cutting interest rates at the Fed’s next meeting, in July. He reiterated that policymakers need to see more information about whether tariff hikes will feed through to faster inflation. The experience of the cost-of-living surge that began in 2021 has left the Fed wary about any sort of repeat, he said.
The Fed chief indicated that June and July inflation figures will be particularly important; now is the time when higher import duties ought to be showing up. The Fed is “perfectly open” to the idea that the pass-through will be “less than we think, and if so, that will matter for our policy.”
The dollar’s prime role in the global financial system remains intact, Powell said in response to repeated questions on this point. Volatility in the Treasuries market in April didn’t damage the dollar’s status, he said. “These narratives of decline are premature and a bit overdone.”
Powell swatted away questions about tax and immigration policy. But he reiterated that the US is on an unsustainable path for borrowing and said there’s no way to know where the tipping point is for the debt burden. The shift in immigration policy has reduced growth in the US labor force, though demand for workers has also been coming down, he said. Housing was another popular topic of questions, but Powell said the Fed has no long-term effect on supply and demand.
Stocks stayed higher through the three-hour hearing, while interest-rate futures continued to reflect expectations for the Fed to resume rate cuts in September. The dollar and Treasury yields were lower. The S&P 500 Index was up 1.1% as of 1:14 p.m. In New York, with two-year Treasury yields down about 5 basis points, at 3.82%.
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