In his semiannual Congressional testimony, Fed Chair Jerome Powell’s prepared remarks highlighted the necessity for Fed to await “greater confidence” in inflation’s sustainable movement towards 2 % target before considering any reduction in policy rates.
Powell acknowledged the policy rate is “likely at its peak” for the current cycle, and it’s appropriate for “dialing back policy restraint at some point this year.” However, he also stressed the “uncertain” economic outlook and noted that the path to 2% inflation is “not assured,”
The Fed Chair warned of the consequences of prematurely or excessively loosening policy, noting that such actions could jeopardize the progress made in inflation control, possibly necessitating “even tighter policy” in the future. Conversely, delaying or minimizing the reduction of policy restraint risks harming economic activity and employment.
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