Federal Reserve chair Jerome Powell told lawmakers on Tuesday that a weakening labor market is just as much a risk to the economy as high inflation.
Why it matters: In recent months, Fed officials have said they want to see more economic data that confirms inflation is receding before lowering interest rates. But Powell acknowledges that waiting too long to do so could unnecessarily harm the economy and job market.
What they’re saying: “[I]n light of the progress made both in lowering inflation and in cooling the labor market over the past two years, elevated inflation is not the only risk we face,” Powell told the Senate Banking Committee hearing.
- “Reducing policy restraint too late or too little could unduly weaken economic activity and employment.”
- But Powell also says that lowering rates too soon could “stall or even reverse the progress we’ve seen on inflation.”
State of play: The Fed has kept interest rates at a two-decade high for a year. Powell’s opening remarks said the central bank still wants to see more economic data that confirms cooler inflation before cutting rates.
- During the hearing, Sen. John Kennedy (R-La.) asked Powell bluntly: “So when are you going to lower interest rates?”
- Powell said on Tuesday he was not going to send any “signals about the timing of any future actions.”