Inflation “remains above” the Federal Reserve’s 2% target, but has been improving in recent months and “more good data would strengthen” the case for central bank interest rate cuts, Fed Chair Jerome Powell said Tuesday in congressional testimony.
In comments that appeared to show increasing faith that inflation will return to the Fed’s target, a requirement for easing monetary policy, Powell compared the lack of progress on that front in the first months of the year to recent improvement that has helped build the Fed’s confidence that price pressures will continue to diminish.
As well, the chair noted, the Fed is now also concerned about risks to the job market and economy should rates remain too high for too long.
“After a lack of progress toward our 2% inflation objective in the early part of this year, the most recent monthly readings have shown modest further progress,” Powell said in remarks to be delivered to the Senate Banking Committee. “More good data would strengthen our confidence that inflation is moving sustainably toward 2%.”
The Fed receives consumer price information for the month of June on Thursday.
A jobs report on Friday showed a still-solid 206,000 jobs added in June, but with a slowing monthly trend and a rising unemployment rate now at 4.1%.
Powell called that a “still low level,” but also noted that “in light of the progress made both in lowering inflation and in cooling the labor market over the past two years, elevated inflation is not the only risk we face.”
Leaving policy too tight for too long, “could unduly weaken economic activity and employment,” Powell said, undermining a period of economic growth that he said “remains solid” with “robust” private demand, improved overall supply conditions, and a “a pickup in residential investment.”
This is a developing story. Please check back for updates.
