Federal Reserve Chair Jerome Powell said Tuesday that policymakers have been encouraged by recent data that suggests inflation is receding, and that continued progress would strengthen the case for an interest rate cut.
“Incoming data for the first quarter of this year did not support such greater confidence. The most recent inflation readings, however, have shown some modest further progress, and more good data would strengthen our confidence that inflation is moving sustainably toward 2 percent,” Powell said in remarks prepared for testimony before the Senate Banking Committee.
The Fed chief is on Capitol Hill for the first of two days of his semi-annual monetary policy testimony. He is slated to appear before the House Financial Services Committee on Wednesday.
Officials voted at their most recent meeting in May to hold interest rates steady at a range of 5.25% to 5.5%, the highest level since 2001. Although policymakers left the door open to rate cuts later this year in their post-meeting statement, they also stressed the need for “greater confidence” that inflation is coming down before easing policy.
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Since then, there has been some evidence that inflation is starting to ease again. The May personal consumption expenditures index showed that inflation had cooled to 2.6%, from a high of 7.1%. At the same time, core prices – which are more closely watched by the Fed because they strip out volatile measurements like food and energy – also climbed 2.6%, the slowest annual rate since March 2021.
“After a lack of progress toward our 2 percent inflation objective in the early part of this year, the most recent monthly readings have shown modest further progress,” Powell said.
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