Federal Reserve Chair Jerome Powell is testifying before congressional lawmakers this week, starting Wednesday morning with the House Financial Services Committee — just one week after the central bank paused its most aggressive rate-hiking campaign in decades.
Powell doubled down on the hawkish view that the Fed isn’t done battling inflation in his remarks to lawmakers.
“Inflation pressures continue to run high, and the process of getting inflation back down to 2 percent has a long way to go,” he said.
But Powell reassured lawmakers Wednesday that the Fed’s policy moves will evolve as inflation slows.
“Now we’re moderating that pace, much as you might do if you were to be driving 75 miles an hour on a highway, then 50 miles an hour on a local highway, then as you get closer to your destination you try to find that destination you slow down even further,” he said.
The Fed chair also addressed the recent turbulence in the banking industry, stressing the “importance of ensuring we have the appropriate rules and supervisory practices for banks of this size.” That’s a nod to lawmakers that they should proceed with new banking regulations — but the committee’s chairman, Rep. Patrick McHenry, a North Carolina Republican, pushed back in his opening remarks.
“There’s a great deal of uncertainty on the horizon. Uncertainty from Fed supervision and regulation is the last thing the well-capitalized banking system needs now,” he said. McHenry repeatedly lambasted Michael Barr, the Fed’s vice chair for supervision, saying he is “injecting politics into policy.”
The Fed held its key lending rate steady at a range of 5-5.25%, but most officials hinted that two more quarter-point rate hikes might be necessary this year, according to the Fed’s latest set of economic forecasts. Indeed, just days after the decision, two Fed officials called for more increases, citing persistent inflationary pressures.
The central bank is in a pivotal moment in its fight against inflation, which remains well above the Fed’s 2% target, and investors will be attentive as to how the influential Fed chair interprets economic data as hints for future policy moves.
Some Democrats have criticized the Fed for its rapid rate increases, fearing job losses if the central bank overdoes it. Their criticism intensified when stress in the regional banking sector emerged this spring, which prompted some of them to call for the Fed to suspend rate increases in May. The Fed hiked again that month.