Powell Anticipates To Be Pressed About Rate Cuts, Bank Rules Before Congress

U.S. Federal Reserve Chair Jerome Powell is expected to face pressure on interest-rate cuts and bank regulations from members of Congress on Tuesday and Wednesday as he provides his semiannual testimony before both chambers.

Sen. Elizabeth Warren (D-Mass.) is anticipated to squeeze Powell on lowering the Fed’s key interest rate during the Senate Banking Committee on Tuesday, Bloomberg reported. She sent a letter to Powell in June urging him to lower it to follow the European Union Central Bank’s move to ease monetary policy.

The Fed has kept its key interest rate in the range of 5.25% to 5.50% since late July 2023 as it waits for the inflation rate, which stands at 3.4%, to fall to 2%.

The Fed in June voted in favor of reducing the number of cuts this year from three to one with plans to lower the rate four times next year. Powell has not said when the Fed might start cutting rates.

Also Read: New York Federal Reserve President Highlights ‘Significant Progress’ In Taming Inflation, But 2% Target ‘Still A Way To Go’

Rep. Jim Himes (D-Conn.), who will hear from Powell on Wednesday before the House Financial Services Committee, said no member of Congress should pressure the Fed to raise or lower interest rates, according to Bloomberg.

Rep. Brendan Boyle (D-Penn.) said concerns over the economy slowing are greater than worries over getting the inflation rate to 2%, despite the strength of the economy.

Boyle also pointed out that expressed mortgage rates are nearly double pre-COVID-19-pandemic levels and therefore making homes unaffordable to buy.

Powell is also expected to get grilled on U.S. plans to force Wall Street lenders to put aside a lot more capital, Bloomberg reported. He said in March “broad and material changes” may be in order for a July 2023 proposal that would force the eight largest U.S. banks to hold about 19% more in capital to protect against financial shocks.

Republicans, including House Financial Services Committee Chairman Patrick McHenry (R-N.C.), spoke vehemently against the original plan in September, urging its withdrawal and arguing that it had "fatal problems" that could endanger the financial system.

Fed officials recently showed other U.S. regulators a three-page document of possible changes to the planned overhaul that would lower the capital requirement on lenders.

Warren has accused Powell of giving bank executives too much sway over the Fed proposal.

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