Jerome Powell Testimony Live: We are not there on inflation

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), said in his semiannual Monetary Policy Report, this time before the House Financial Services Committee, that there is still job to be done regarding inflation.

Key highlights

"No changes to own commitment that will not resign if asked by Trump."

"The Fed's last policy framework did not limit the Fed's response to inflation".

"The Fed makes its decisions based on what's happening in the economy."

"We have ways to go on shrinking the balance sheet."

"We want to keep policy restrictive for now."

"We are close but not there on inflation".

"It is possible that the Fed would have to move the policy rate on tariffs."

This section below was published following Federal Reserve Chairman Jerome Powell's testimony at 15:00 GMT on February 11:

Powell testimony key takeaways

"Policy is well-positioned to deal with risks, uncertainties."

"We can maintain policy restraint for longer if economy remains strong and inflation does not move toward 2%."

"We can ease policy if labor market unexpectedly weakens or inflation falls more quickly than expected."

"The US is economy strong overall; inflation is closer to 2% goal but still somewhat elevated."

"Fed's framework review will not include a focus on inflation target, which will remain 2%."

"Fed will wrap up framework review by late summer."

"We are in a pretty good place with this economy."

"Want to make more progress on inflation."

"Don't see any reason to be in a hurry."

"We are not in recession."

"Not for the Fed to comment on tariff policy"

"Clearly not allowed under the law for President to remove a Fed board member."

"Would use quantitative easing only when rates are at zero."

"Believe neutral rate has risen from very low pre-pandemic level."

"A sharp increase in M2 might cause some inflation."

This section below was published as a preview of Federal Reserve Chairman Jerome Powell's testimony at 10:00 GMT.

• Jerome Powell’s testimony in the US Congress will be a top-tier market-moving event this week.
• New clues on the Federal Reserve interest rate path are awaited.
• US Dollar, stock markets and other asset classes could see big swings with the Fed Chair’s words. 

Jerome Powell, Chairman of the United States (US) Federal Reserve (Fed), will deliver the Semi-Annual Monetary Policy Report and testify before the Senate Banking Committee on Tuesday. The hearing, entitled “The Semi-Annual Monetary Policy Report to the Congress,” will start at 15:00 GMT and it will have the full attention of all financial market players. 

Jerome Powell is expected to address the main takeaways of the Fed’s Semi-Annual Federal Reserve Monetary Policy Report, published last Friday. In that report, the Fed noted that financial conditions continue to appear “somewhat restrictive” and reiterated that policymakers will weigh data when deciding on future policy moves.

In a long Q&A session, US representatives are expected to ask Powell about the interest rate path, inflation developments, and the economic outlook. They are also very likely to inquire about how US President Donald Trump’s policies could influence prices, growth prospects and the monetary policy moving forward.

The CME Group FedWatch Tool shows that markets price in a less-than-10% probability that the Fed will lower the policy rate by 25 basis points (bps) in March after the latest employment report reaffirmed tight conditions in the labor market.

In January, Nonfarm Payrolls (NFP) rose 143,000. Although this reading came in below the market expectation of 170,000, the US Bureau of Labor Statistics (BLS) announced upward revisions to previous NFP prints. "The change in total Nonfarm Payroll employment for November was revised up by 49,000, from +212,000 to +261,000, and the change for December was revised up by 51,000, from +256,000 to +307,000. With these revisions, employment in November and December combined is 100,000 higher than previously reported," the BLS noted in its press release.

The market positioning suggests that the US Dollar (USD) has little room left on the upside even if Powell confirms that they will hold the policy unchanged in March. On the other hand, the USD could come under selling pressure in case Powell adopts an optimistic tone about the inflation outlook and leaves the door open for a rate reduction at the next policy meeting. 

About Jerome Powell (via Federalreserve.gov)

"Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028."