Fed Char Jerome Powell Testifies Before Congress On The Economy

Fed Char Jerome Powell Testifies Before Congress On The Economy

Federal Reserve Chair Jerome Powell is on the hot seat this week as he testifies before Congress. Investors will be watching closely as they search for signs of future rate hikes.

Powell is expected to speak before the Senate Banking Committee on Tuesday morning and the House Financial Services Committee on Wednesday. During these testimonies, he’ll be tasked with convincing lawmakers that the central bank is capable of bringing down inflation without crashing the US economy in its wake.

Powell will have some good news to report — when he last testified before Congress in June, the inflation rate was at 40-year-highs, nearing 9%. Today, that rate has dropped to 6.4%, though it remains well above the Fed’s annual target of 2%. Year-over-year inflation has declined for seven consecutive months.

Still, some in Congress have been openly critical of the Fed’s efforts to cool the economy through painful interest rate hikes. Investors will also be on edge — hawkish language or even an aggressive tone from Powell could lead to market volatility.

Here are three things to watch for in this week’s testimony:

The state of the economy

Is the US economy heading towards a recession or not? It’s the question on most economists and investors minds.

Many Fed officials have admitted that they themselves are baffled by the current economic readout: Data signal a rip-roaring labor market, high home prices and strong US consumers but the decline in inflation has stalled and prices remain elevated.

The economy has become seemingly impervious to a string of large interest rate hikes by the Fed, and investors are waiting to see how much longer it can hold up.

“The inflationary forces impinging on the US economy at present represent a complex mixture of temporary and more long-lasting elements that defy simple … explanation,” said Fed Governor Philip Jefferson at a conference late last month.

So how will Powell answer questions about something that defies “simple” explanation? We’ll soon find out.

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