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Home Business & Finance

Powell Warns of Economic Risks from High Interest Rates

Nnaemeka OkwarabyNnaemeka Okwara
July 9, 2024
in Business & Finance
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Powell Warns of Economic Risks from High Interest Rates
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Federal Reserve Chair Jerome Powell delivered a significant statement on monetary policy, cautioning that maintaining high interest rates for an extended period could harm economic growth. In his prepared remarks for his semiannual testimony before Congress, Powell emphasized the importance of balancing inflation control with sustained economic activity and employment.

The Federal Reserve has raised benchmark interest rates 11 times since last year, bringing the overnight borrowing rate to a range of 5.25%-5.50%, the highest level in 23 years. While inflation has shown some easing, Powell acknowledged the progress made in cooling the labor market and lowering inflation. However, he cautioned that reducing policy restraint too late or too little could weaken economic activity and employment.

Powell’s testimony comes as the Fed approaches the one-year anniversary of its last rate hike. Markets expect the Fed to begin cutting rates in September, with another quarter percentage point reduction likely by year-end. However, Fed officials have indicated only one cut in their June meeting.

The Fed chair emphasized the importance of sustained progress in inflation reduction, citing recent encouraging data. The personal consumption expenditures price index, the Fed’s preferred inflation measure, stood at 2.6% in May, down from a peak of over 7% in June 2022. Powell noted that more positive data would strengthen confidence in achieving the Fed’s 2% inflation objective.

Powell’s testimony will be followed by questioning from Senate Banking Committee members on Tuesday and the House Financial Services Committee on Wednesday. While Powell has avoided making dramatic policy announcements in past appearances, his testimony may face intense scrutiny amid a volatile presidential campaign and concerns over the Fed’s independence.

In his prepared remarks, Powell emphasized the importance of operational independence for the Fed to fulfill its mandate. He also highlighted the solid pace of economic expansion, robust private domestic demand, and slower but still-solid increases in consumer spending, despite recent deceleration in GDP growth.

Overall, Powell’s testimony strikes a balance between inflation control and sustained economic growth, emphasizing the need for careful consideration in setting monetary policy.

His remarks will be closely watched by markets and policymakers alike, as the Fed navigates the delicate task of achieving its dual mandate of maximum employment and price stability.

Tags: Economyfederal characterFinanceForeign NewsInterest ratesNewsPowellPowell Warns of Economic Risks from High Interest RatesRisks
Nnaemeka Okwara

Nnaemeka Okwara

Okwara Nnaemeka Emmanuel is a skilled wordsmith, passionate blogger, and content writer with a degree in Media Content, He has made a significant mark in the industry. He also holds certification in Marketing and advertising. He has honed a unique blend of creativity and strategic thinking.Driven by a belief in the power of creativity, He has established a niche for himself in diverse regions, leaving a trail of successful projects and satisfied clients. His ability to craft compelling narratives and engage audiences sets him apart in the competitive world of content creation.As a dedicated professional, He continues to push boundaries and set new landmarks in their field. Whether it's through captivating blog posts, persuasive copywriting, or innovative content strategies, Nnaemeka’s consistently delivers excellence, leaving a long lasting impact

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