Economic Slowdown: Powell On The Hot Seat Before Congress, To Testify Amid Rising Unemployment Rates

Jerome Powell, the chair of the Federal Reserve, will testify before Congress this week amidst signs of slowing inflation and a softening economy.

What Happened: With the economy showing signs of slowing growth and employment, Powell is expected to inform lawmakers that the Federal Reserve officials require more evidence of this slowdown before considering a cut in interest rates.

The consumer price index data for June, set to be released on Thursday, could provide further evidence supporting this stance. However, this data will be released after Powell’s two-day Congressional testimony, which begins on Tuesday with the Senate Banking Committee and continues on Wednesday with a House panel, reported Bloomberg.

Recent statistics have shown the highest unemployment rate since late 2021, and other data indicates weaker economic growth. Consequently, Powell is likely to face tough questions from lawmakers about the Fed’s reluctance to lower borrowing costs.

Also Read: Fed Minutes: Policymakers Are Not In Rush To Cut Interest Rates, Decision Hinges On Economic Data

On Tuesday, Powell stated that recent data suggests inflation is returning to a downward trend, but he and his colleagues would like to see this progress continue.

The core CPI, which excludes food and energy costs and is seen as a better measure of underlying inflation, is expected to rise 0.2% in June for a second month. This would mark the smallest back-to-back gains since August, a pace more acceptable to Fed officials.

Why It Matters: As the head of the Federal Reserve, Powell’s testimony is crucial in setting the tone for economic policy. His comments on the state of the economy, inflation and employment growth will be closely watched by lawmakers, economists and investors alike.

The Fed’s decision on interest rates impacts borrowing costs for consumers and businesses, affecting everything from mortgage rates to the cost of business loans. A decision to cut rates could stimulate economic growth, but could also lead to inflation.

With recent data showing a slowdown in the economy and employment growth, Powell’s testimony will be a key indicator of the Fed’s future policy direction.

Now Read: Wall Street Banks Readjusts 2024 Interest Rate Predictions After Fed’s Dovish Turn

This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.