News
S&P 500, Nasdaq strengthen to record highs as Powell testimony keeps rate cut hopes alive
Federal Reserve Chairman Jerome Powell kicked off his semiannual update to Congress on Tuesday, appearing before the Senate Banking Committee. He will appear before the House Financial Services Committee tomorrow.
Yahoo Finance’s Jennifer Schonberger tells the story:
Powell indicated the central bank was getting closer to feeling comfortable with interest rate cuts, saying he was encouraged by evidence of cooler inflation and that more “positive data” would help the Fed get to where it wants to be.
Inflation numbers “showed some modest progress” after some warmer readings in the first quarter, “and further positive data would strengthen our confidence that inflation is moving sustainably toward 2%,” he said in prepared testimony before U.S. lawmakers on Tuesday.
It’s the second time in the past week that Powell has offered optimism about the inflation picture. On Tuesday, he noted that the last two inflation readings for April and May “suggest that we are returning to a disinflationary path.”
Federal Reserve Board Chairman Jerome Powell speaks at a news conference at the Federal Reserve in Washington, June 12, 2024. (AP Photo/Susan Walsh, File) (ASSOCIATED PRESS)
The next reading of inflation as measured by the Consumer Price Index will be released on Thursday.
Inflation is not expected to worsen, but it is not expected to decline either. Based on core CPI — which excludes volatile food and energy prices that the Fed cannot control — inflation is expected to hold steady at 3.4% in June, down from the same level in May.
Powell noted in his prepared testimony that the Fed will continue to make policy decisions on a meeting-by-meeting basis. He reiterated that cutting rates too quickly could reverse progress in reducing inflation, while keeping rates high for too long could weaken the economy and the job market.
Democrats are expected to pressure Powell to cut rates soon, while Republicans are likely to press Powell on bank capital rules and emphasize that rates should not be cut too close to the election in November.
Powell, in his testimony, stressed that Congress has entrusted the Fed with the operational independence needed to take a “long-term perspective” in pursuing its dual mandate of maximum employment and stable prices.