Federal Reserve Chairman Jerome Powell is under increasing pressure this week from both Democrats, who hope to continue the economic boom by cutting interest rates in a year of presidential and congressional elections, and Republicans, who want to withdraw plans to tighten capital requirements for banks. Looks like I’ll have to face it.
Chairman Powell on the 6th and 7th, respectively.House of Commons Finance Committee、House of Lords Banking Committeegives biannual Congressional testimony on monetary policy. It’s been two years since the U.S. Federal Reserve began aggressively raising interest rates to curb inflation.
Fed Chairman Powell
Photographer: Nathan Howard/Bloomberg
With the economy trending steadily and the inflation rate slowing toward the price target, the chairman is expected to provide reasons why the monetary authority is not in a hurry to lower interest rates. Meanwhile, some Democratic Party members who have avoided bashing the financial authorities are growing impatient.
“Pressure usually comes from one side or the other, and with the Fed becoming more hawkish this year, it’s probably coming from Democrats this time,” said Marc Samarin, founder of economic and political analysis firm Evenflow Macro. I predict that it will be.”
“They want to avoid an economic downturn, because if that happens, things will escalate quickly. For Democrats, that’s a huge risk,” Samarin said of Democrats.
The financial authorities raised interest rates at a rapid pace in both 2022 and 2023, and the target range for the federal funds (FF) interest rate was raised to 5.25-5.5% in July last year, the highest level in more than 20 years. It remains at the same level.
On the other hand, the Personal Consumption Expenditure Price (PCE) Comprehensive Price Index, which the authorities focus on as an inflation indicator, rose 2.4% year-on-year in January, slowing down from the peak of 7.1% recorded in 2022, but continued at 2%. exceeds the inflation target.
Against this backdrop of progress in curbing inflation, some members of Congress are calling for authorities to begin unwinding monetary tightening.
Housing purchase support
In a January 30 letter to Chairman Powell, Senate Banking Committee Chairman Brown (D) said that high interest rates are hurting small businesses and putting housing out of reach for many Americans. He urged a rate cut “early in the year.” Following Brown’s letter, other Democrats on the committee may also call on Powell to lower interest rates.
Rep. Van Hollen, one of the committee’s Democratic members, told the Fed in an interview last week that they needed to focus on housing costs, saying they needed to “make housing more affordable for more Americans.” It ordered that measures be taken.
Warren, another Democratic member of the committee and a longtime critic of Powell, said in an interview on Bloomberg Television, “One of the major costs for households is housing, and the current high interest rates are “This is leading to increased costs for households. It’s time to lower interest rates.”
Senator Warren speaks to Bloomberg TV
Source: Bloomberg
U.S. financial officials are working to send a public message, with Chairman Powell himself giving an interview on CBS News’ “60 Minutes.” The idea is that the central bank needs more evidence to be confident that inflation is on target, and once that point is reached, it could gradually lower interest rates.
Financial authorities do not want to rekindle upward pressure on prices by cutting interest rates too quickly. Officials made similar mistakes in the 1970s, forcing them to raise interest rates to even higher levels, ultimately triggering a deep recession.
capital controls
Meanwhile, Republican lawmakers are expected to grill Chairman Powell on the Fed’s proposal, which includes raising capital requirements by about 20% for major banks.
Chairman McHenry of the House Financial Services Committee
Photographer: Nathan Howard/Bloomberg
Vice Chairman for Banking Supervision Barr’s earlier proposal to strengthen capital requirements has been the subject of fierce criticism from Republican lawmakers and the banking industry. Changes to the original plan are likely soon, and Powell has signaled that the final version will require broad support from the Fed’s board.
House Financial Services Committee Chairman McHenry said the “biggest issue” for the Fed was not the 0.25 point increase or decrease in interest rates, but the handling of bank capital requirements. It lacks sound economic analysis and is not good for America’s competitiveness.”
Chairman Powell’s testimony to Congress will mark approximately one year since the bankruptcy of Silicon Valley Bank (SVB), so there will also be questions regarding the Bank Term Funding Program (BTFP), an emergency lending program that will end on March 11. Might happen.
Original title:Powell to Face Increased Pressure From Both Parties at Hearings(excerpt)
2024-03-04 14:00:00
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