Federal Reserve Chair Jerome Powell on Wednesday reinforced a message that the Fed is paying growing attention to a slowing job market and not only to taming inflation, a shift that signals it’s likely to begin cutting interest rates soon.
“We’re not just an inflation-targeting central bank,” Powell told the House Financial Services Committee on the second of two days of semi-annual testimony to Congress. “We also have an employment mandate.”
On Tuesday, when Powell addressed the Senate Banking Committee, he suggested that the Fed had made “considerable progress” toward its goal of defeating the worst inflation spike in four decades and noted that cutting rates “too late or too little could unduly weaken economic activity and employment.”
Congress has given the Fed a dual mandate: To keep prices stable and to promote maximum employment.
“For a long time,” Powell said Wednesday, “we’ve had to focus on the inflation mandate.” As the economy roared out of the pandemic recession, inflation hit a four-decade high in mid-2022. The Fed responded by raising its benchmark rate 11 times in 2022 and 2023. Inflation has since plummeted from its 9.1% peak to 3.3%.
The U.S. economy and job market have continued to grow, defying widespread predictions that much higher borrowing costs resulting from the Fed’s rate hikes would cause a recession. Still, growth has weakened this year. From April through June, U.S. employers added an average 177,000 jobs a month, the lowest three-month hiring pace since January 2021.
Powell told the House panel on Wednesday that to avoid damaging the economy, the Fed likely wouldn’t wait until inflation reached its 2% target before it would start cutting rates.
Read the full report from the Associated Press here.
