Fed's Powell still expects rate cuts, but inflation progress "not assured"
By Howard Schneider
WASHINGTON (Reuters) — With asset values from stocks to crypto to homes piling higher, inflation still considered too high, and worries of «exuberance» creeping into the conversation, Federal Reserve Chair Jerome Powell on Wednesday will update U.S. lawmakers on the economy and prospects for interest rate cuts in a politically charged election year.
The landscape he'll lay out is in many ways encouraging, with the unemployment rate a low 3.7%, inflation by some measures within striking distance of the Fed's 2% target, and the economy still growing despite the tight credit conditions imposed by the central bank.
But the next steps remain uncertain, with recent inflation readings stickier than expected in key ways, and some Fed officials and outside analysts concerned the U.S. economy remains too strong for price pressures to fully recede — an argument for rate cuts to be delayed further than anticipated.
Powell kicks off two days of testimony with a 10 a.m. ET (1500 GMT) hearing before the House Financial Services Committee, explaining to lawmakers who face inflation-weary voters this November why he is confident price pressures will keep easing without upending the job market or conversely why the window for a «soft landing» may be narrowing.
The best-case outcome «is hardly assured,» Atlanta Fed President Raphael Bostic said on Monday in the last policymaker comments before Powell's House testimony. Bostic fretted «pent-up exuberance» among businesses could lead to a spending surge and renewed inflation if the Fed cuts rates too soon.
The comment somewhat echoed Alan Greenspan, the former Fed chair who three decades ago called out the «irrational exuberance» driving a developing bubble in technology
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