The Chairman of the Federal Reserve System, Jerome Powell, on Tuesday, July 9, expressed concern that keeping interest rates at a high level for too long could pose a threat to the growth of the United States economy.
Setting the stage for a two-day appearance on Capitol Hill this week, the head of the central bank of the US said the economy continues to be strong, as does the labor market, despite some cooling. He also noted that inflation is starting to weaken in the United States. It is worth mentioning that the corresponding target indicator of the Fed is 2%.
Jerome Powell said that increased inflation is not the only risk from the point of view of the economic outlook. In this context, he noted that too late and too little easing of monetary policy could lead to an unjustified weakening of economic activity and worsen the employment situation.
The Fed’s overnight borrowing rate currently stands at 5.25-5.50%. This figure is the highest in the approximately last 23 years. The United States financial regulator launched a campaign to aggressively raise interest rates in March 2022. The Fed’s actions were aimed at countering inflation.
Markets currently expect the central bank of the United States to start cutting interest rates in September. It is widely believed among supporters of this point of view that by the end of the current year, the cost of borrowing in the US will decrease by a quarter of a percentage point.
The mentioned statement by the Fed chairman is part of congressionally mandated semiannual updates on monetary policy.
In his past speeches, Jerome Powell has refrained from making policy statements. Several Democratic committee members are calling on the Fed to cut interest rates soon. Sen. Sherrod Brown, D-Ohio, the mentioned committee chair, expresses concern that progress in creating good-paying jobs will be canceled if the United States financial regulator waits a long time for the lowering of borrowing costs.
Jerome Powell has repeatedly declared that the Fed does not engage in politics and does not participate in making policy decisions that go beyond its own functions. He also focuses on the operational independence of the central bank of the United States.
As we have reported earlier, US Economy Faces Threat of Unemployment.
