U.S. Federal Reserve Chairman Jerome Powell testifies during the Senate Banking Committee hearing titled “The Semiannual Monetary Policy Report to the Congress”, in Washington, U.S., March 3, 2022.
Tom Williams | Reuters
Federal Reserve Chairman Jerome Powell appears before Congress with a tall task: Convince legislators that he’s committed to bringing down inflation while not pulling down the rest of the economy at the same time.
Markets have been on tenterhooks wondering whether he can pull it off. Sentiment in recent days has been more optimistic, but that can swing the other way in a hurry should the central bank leader stumble this week during his semiannual testimony on monetary policy.
“He has to thread the needle here with two messages. One of them is reiterating some of the comments he has made that there has been some progress on inflation,” said Robert Teeter, Silvercrest Asset Management’s head of investment policy and strategy.
“The second thing is being really persistent in terms of the outlook for rates remaining high. He’ll probably reiterate the message that rates are staying elevated for some time until inflation is clearly solved,” Teeter added.
Should he take that stance, he’s likely to face some heat, first from the Senate Banking Committee on Tuesday followed by the House Financial Services Committee on Wednesday.
Democratic legislators in particular have been worried that the Powell Fed risks dragging down the economy, and in particular those at the lower end of the wealth scale, with its determination to fight inflation.
Slow out of the blocks
The Fed has raised its benchmark interest rate eight times over the past year, most recently a quarter percentage point increase early last month that took the overnight borrowing rate to a target range of 4.5%-4.75%.
Markets also have been torn between wanting the Fed to bring down inflation and worried that it will go overboard. The central bank’s slow start in tackling the rising cost of living has…
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