By AP Economics Writer Christopher Al Gerber
WASHINGTON (AP) — The Federal Reserve is preparing to avoid changing key interest rates as inflation rises and job markets are strong, Chairman Jerome Powell said in the two days before Congress. He said on the first Tuesday of his appearance.
After cutting key rates in the last three months of last year, “the economy remains strong, so there’s no need to hurry to adjust policy stance,” in a written statement to Senate Banks. I’ve said that. Committee.
Powell’s appearance still comes with inflation above the Fed’s 2% target, with the Trump administration trying to impose tariffs on steel and aluminum and significantly reduce government spending, and many years of US It overturns the policy. President Donald Trump has also attacked the Fed frequently in the past, raising concerns about historic independence from politics.
Powell quickly plunged into the partisan chaos surrounding Trump’s executive order gusts and billionaire Elon Musk’s efforts, through government efficiency.
Sen. Elizabeth Warren, a Massachusetts Democrat, said the Fed’s Office of Consumer Financial Protection, a Consumer Protection Bureau, which was shut down over the weekend when the Trump administration ordered officials at the office to stop work and close the company. The building urged Powell to maintain his support for a week. The CFPB receives funds from the Fed.
“Don’t make the Federal Reserve an accomplice for this illegal activity, and make the Fed’s reputation forever,” Warren said.
Sen. Tim Scott, a South Carolina GOP Senator and chairman of the committee, criticized banking regulators, including banking regulators who are allegedly “detached” to CRYPTO companies and industry individuals. A dropout occurs when a bank closes its customer account because it believes it poses financial, legal, or reputational risks to the bank.
Scott accused him of taking off on political grounds, reflecting claims by venture capitalist Mark Andrezen and others.
Powell said, “It’s fair to see him take off.”
Powell refused to mention Trump’s tariffs or other policy changes in his statement, but said the Fed’s interest rates are “good to address the risks and uncertainties we face.” Ta.
Some senators asked Powell about the high mortgage rates and the impact on already high housing costs, but the Fed chair has faced little criticism of its interest policy.
Sen. John Kennedy, a Louisiana Republican, praised Powell and the Fed for knocking out inflation from a peak of 9.1% in June 2022 to the current 2.9%. Kennedy noted that many economists predict that Fed hikes (nearly 0-5.3%) in 2022 and 2023 at a rapid rate (nearly 0-5.3%) will cause a recession. But instead, the economy continues to expand.
“In fact, knocking on a tree, we went through soft landing,” Kennedy said. Fed officials are “trustworthy” for this, he added.
The Fed chair also said the central bank has launched a second review of policy strategies and communications tools. Powell repeatedly said that the reviews didn’t focus on whether to change the 2% inflation target. Powell has repeatedly said that while the Fed struggles to reduce inflation to 2%, it should not change its target.
After the Fed’s final policy review in 2019, it said it would seek an average inflation of 2% over time. Some economists argue that the change has led the Fed to respond slowly to inflationary spikes in 2021 and 2022. .
Comments from many Fed officials last week, and lower unemployment rates suggest that the likelihood of a reduction soon declined.
At the December meeting, Fed officials painted pencils for two interest rate cuts this year, but economists and Wall Street investors are increasingly skeptical, predicting that there will be no cuts this year at all. Some people do. On Friday, Morgan Stanley economists expect a fee cut in 2025, with investors expecting only one in July, according to futures market pricing. He said.
Less reductions could translate into higher mortgage rates and higher costs to borrow money from anything from cars to credit cards. Still, mortgage rates are closely tied to yields on 10-year Treasury bonds, which could move independently of the Fed’s actions.
Last Friday, Gov. Adriana Kugler’s federal government said the labor market is “stable” and “gives a little time to make some decisions.”
She added that potential policy changes from the Trump administration have led to uncertainty in their outlook for the economy. Economists say widespread tariffs and the deportation of migrants that Trump has promised could boost inflation. Others argue that Trump’s deregulation policies can lower prices by increasing supply.
“The careful and careful step is to keep the (Fed key) rate for a while,” Kugler said.
The government said last Friday that employers added a solid number of jobs last month, and the unemployment rate has been marked at 4% for the second straight month, marking its historically low. Employment in November and December was revised much higher.
Stable employment and mostly healthy employment markets suggest that the Fed has less urgent need to lower borrowing rates. It took a sharp half-cut in September after weak employment stumbled the economy and possibly spurred a recession.
Jobs “strengthens our confidence that the Fed’s disconnection cycle is over,” Bank of America economists wrote in a note Friday.
Original issue: February 11, 2025 11:05am EST
