Federal Reserve Chair to Address Lawmakers on Inflation and Interest Rates
Federal Reserve Chair Jerome Powell is set to address lawmakers, emphasizing the need for more evidence of slowing inflation before considering interest rate cuts, despite signs of weaker economic growth and employment. Powell is scheduled to testify before the Senate Banking Committee next Tuesday and the House panel next Wednesday. Recent data indicates a downward trend in inflation, with the core Consumer Price Index (CPI) expected to rise by 0.2% in June, marking the smallest increase since August. The overall CPI is forecasted to increase by 0.1%, with a 3.1% annual rise, the smallest in five months. The unemployment rate, currently at 4.1%, is the highest since late 2021, raising questions about the Fed's reluctance to lower borrowing costs. Economists predict that soft inflation data for June, July, and August could lead the Fed to start cutting rates by September. Additionally, there are global economic highlights to watch out for, including inflation data from China, Sweden, and the aftermath of France's parliamentary election. Central banks in New Zealand, Korea, and Kazakhstan are also expected to consider rate cuts due to slowing economic growth.
Key Takeawaysa
- Jerome Powell is likely to emphasize the need for further inflation confirmation before rate cuts.
- June core CPI is expected to rise by 0.2%, the smallest back-to-back gains since August.
- The unemployment rate is at 4.1%, the highest since late 2021, raising pressure on the Fed.
- Global economic highlights include inflation data from China, Sweden, and France's parliamentary election aftermath.
- Central banks in New Zealand, Korea, and Kazakhstan are expected to consider rate cuts amid slowing economic growth.
Analysis
Jerome Powell's cautious stance on rate cuts, pending stronger inflation slowdown evidence, impacts global markets and central banks. The high unemployment and minimal CPI growth pressure the Fed, potentially delaying rate reductions until September, which could slow economic recovery. The international markets, particularly in China and Europe, face uncertainty as central banks await the Fed's move, influencing their rate decisions and economic policies. Short-term market volatility is expected, with long-term effects depending on sustained inflation control and global economic coordination.
Did You Know?
- Federal Reserve Chair Jerome Powell: Jerome Powell is the Chair of the Federal Reserve, overseeing monetary policy, including setting interest rates to manage inflation and employment levels.
- Core Consumer Price Index (CPI): A measure of inflation that excludes volatile food and energy prices, providing a clearer picture of underlying inflation trends.
- Unemployment Rate: The percentage of the labor force that is jobless and actively seeking employment, influencing decisions to cut interest rates for economic growth and job creation.