Maria Eloisa Capurro
5 min read
In This Article:
(Bloomberg) — Federal Reserve Chair Jerome Powell will have two chances this week to explain to lawmakers why he and most of his fellow policymakers seem resolved to continue holding interest rates steady at least until September, ignoring President Donald Trump’s persistent calls to lower borrowing costs.
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The Fed chair will testify before the House Financial Services Committee at 10 a.m. Tuesday, and at the same time on Wednesday before the Senate Banking Committee. The appearances come less than a week after officials agreed to keep rates unchanged for a fourth consecutive meeting. They also follow the recent US attack on Iran, which escalated fears of surging oil prices and risks to the global economy.
Here’s what to listen for in his prepared remarks and in the question-and-answer sessions with lawmakers:
Rates, Economy
Look for Powell to carefully follow his message from last week, when he said the central bank was “well positioned to wait to learn more about the likely course of the economy” before considering any move in interest rates.
“We’d like to get some more data, and again, in the meantime we can do that because the economy remains in solid condition,” Powell told reporters last week. “Ultimately the cost of the tariff has to be paid, and some of it will fall on the end consumer.”
So far, tariffs imposed by the Trump administration have not yet delivered the higher prices and higher unemployment that policymakers have warned about. Indeed, economists expect data this week will show the Fed’s preferred gauge of underlying inflation rose just 0.1% in May for a third month. That would mark the tamest three-month stretch since 2020.
Two Fed governors, Christopher Waller and Michelle Bowman, have each said the impact from tariffs on prices is likely to be short-lived and they might support a rate cut in July.
“Powell seems to see little urgency to adopt a strong view on the likely course of inflation, and he seems to see a lot of risk to making the wrong assessment,” said James Egelhof, chief US economist at BNP Paribas.
Iran Conflict
Powell will almost certainly be queried about the potential economic impact of ongoing warfare between Israel and Iran. Over the weekend, the US joined the conflict directly, bombing Iranian nuclear facilities. So far, oil prices have not jumped dramatically on the news.
