Interest rates may start to go down soon, Federal Reserve Chair Jerome Powell testified before the Senate Banking Committee on Tuesday during the Semiannual Monetary Policy Report to the Congress.
The Fed has kept its policy rate in the 5.25% to 5.5% range since July 2023.
“Reducing policy restraint too late or too little could unduly weaken economic activity and employment,” Powell said. “In considering adjustments to the target range for the federal funds rate, the Committee will continue its practice of carefully assessing incoming data and their implications for the evolving outlook, the balance of risks, and the appropriate path of monetary policy.”
Inflation has “eased notably” in the past two years, Powell said, adding, however, that it still remains above the Fed’s 2% target. He didn’t offer a timeline for a possible reduction in interest rates, but he hinted that lower rates could be coming, with inflation headed in the right direction and a labor market that appears “fully back in balance.”
“Recent indicators suggest that the US economy continues to expand at a solid pace. Gross domestic product growth appears to have moderated in the first half of this year following impressive strength in the second half of last year,” Powell said. “Private domestic demand remains robust, however, with slower but still-solid increases in consumer spending.”
According to the June Survey of Consumer Expectations, released Monday by the Federal Reserve Bank of New York’s Center for Microeconomic Data, one-year-ahead expectations about home prices and one-year-ahead expectations about specific goods prices all declined.
“Higher interest rates make borrowing more expensive for working families — whether it’s for a mortgage or a car or anything else. Most people do not have the luxury of paying for everything in cash,” Sen. Sherrod Brown (D-OH), chair of the Senate Banking Committee, stated Tuesday. “Every month that the Fed keeps rates high, it costs Americans money by making it more expensive to buy a house and borrow money.”