The Federal Reserve recently decided to hold interest rates, pausing a period of uninterrupted rate hikes that began in March 2022.
The Fed Chair Jerome Powell is scheduled to testify before the House Financial Services Committee on Wednesday and the Senate Banking Committee on Thursday, marking his first appearance before Congress since March.
These eagerly anticipated hearings will give legislators the opportunity to question Powell directly about the Fed’s recent actions and policy decisions.
Powell’s most recent Congressional testimony was on March 7-8, prior to the banking-sector upheaval caused by the failures of Silicon Valley Bank and Signature Bank.
“The full effects of the Fed’s monetary tightening so far are yet to be felt, and signaled that there is still work to be done in terms of rate hikes,” said Powell
The emergence of a regional banking crisis just a day after Powell’s testimony triggered strong criticism of the Fed’s stance and led policymakers to reconsider their policy strategy.
It is expected that these eagerly anticipated hearings will give legislators the opportunity to question Powell directly about the Federal Reserve’s recent actions and policy decisions.
At the June FOMC meeting, policymakers decided to hold interest rates steady for the first time in 15 months but indicated a median preference for two more rate raises this year.
Members of Congress are anticipated to urge for further clarity on Powell’s contradictory signals delivered during his press conference on June 14. “ The Federal Reserve is getting close to its intended interest rate destination, and it moved significantly closer to having a sufficiently restrictive monetary stance,” said Powell at the time
He did, however, downplay the impact of the two projected rate hikes by the end of the year, as emerged in the latest summary of economic projections, expressing high uncertainty about properly predicting the future federal funds rate so far in advance.
Powell, on the other hand, backed the idea of potentially higher long-term rates, signaling that rate cuts are still a couple of years away and reiterating the Fed’s commitment to do “whatever it takes” to attain the targeted inflation objective.
In an effort to create balance, The Fed has increased rates by five percentage points since March 2022. Chairman Powell stated last week that this rapid tightening provides officials with an opportunity to pause and carefully assess incoming data before determining their next course of action.
Powell will have to deal with the diverse and opposing interests of each political party.
On the one hand, Republicans will press him to put inflation on the front burner, while Democrats will be more concerned with labor market prospects in light of the 2024 presidential elections.
Democrats are also expected to push for harsher regulation during Powell’s hearing, which could include rolling back the asset cap increases announced in 2018, which some blame for Silicon Valley Bank’s troubles. Republicans, on the other hand, are likely to resist adding new capital requirements on banks and instead raise worries about the Federal Reserve’s inadequate supervision that contributed to the failures.
© 2023 Zenger News.com. Zenger News does not provide investment advice. All rights reserved.
Produced in association with Benzinga
Edited by Judy J. Rotich and Virginia Van Zandt
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