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S&P 500 ready to rise from record high after Powell’s testimony.

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S&P 500 ready to rise from record high after Powell’s testimony.

Federal Reserve Chair Jerome Powell addressed the Senate Banking Committee on Tuesday, signaling that the central bank is moving closer to feeling comfortable about potential interest rate cuts. Powell expressed optimism about the inflation outlook, pointing to evidence of cooling inflation and noting that more positive economic data could further boost confidence in the Fed’s goals. He emphasized the importance of sustained progress towards the 2% inflation target and highlighted the need for additional “good data” to support future policy decisions.

Powell’s comments come in the wake of recent inflation readings that have shown signs of improvement, with the next Consumer Price Index report expected to be released on Thursday. While inflation is not anticipated to worsen, it is also not projected to decline, especially when considering core CPI figures that exclude volatile food and energy prices. Powell reiterated the Fed’s commitment to making monetary policy decisions on a meeting-by-meeting basis, cautioning against moving rates too quickly or maintaining elevated rates for an extended period that could negatively impact the economy and job market.

The upcoming House Financial Services Committee hearing with Powell is expected to involve discussions on the timing of potential rate cuts, with Democrats advocating for prompt action while Republicans may focus on bank regulations and the timing of rate adjustments close to the November election. Powell underscored the operational independence granted to the Fed by Congress, enabling the central bank to take a long-term approach in fulfilling its dual mandate of achieving maximum employment and stable prices.

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