Powell:Well-positioned for the time being to wait to learn about the course of the economy

• Fed is well-positioned for the time being to way to learn more about likely course of economy before adjusting policy.
• Economy solid despite elevated uncertainty.
• Near full employment, inflation somewhat above 2% target.
• Attentive to risks on both sides of the Fed’s mandate.
• Strong labor market has helped narrow demographic disparities in earnings, employment.
• Increase tariffs likely to push up on inflation, weigh on economic activity.
• Fed’s obligation is to prevent the one-time increase in price level from becoming ongoing inflation problem by keeping inflation expectations while anchored.
• To meet that obligation will balance employment and price stability mandates.
• Without price stability, cannot achieve long periods of strong labor market conditions.

Powell keeps his more bearish bias tilt from last week’s FOMC meeting and from his press conference.

Since then FOMC members Waller and Bowman have expressed a desire to ease conditions earlier rather than later (as early as July). Much will depend on how inflation numbers continue. Feds Barkin, Daly and Bostic have been in line with the Fed Chairs stance that waiting is appropriate for now.

The full text from his opening remarks for his testimony can be found by CLICKING HERE

Here are quoted text by topic from the Fed Chairs prepared remarks:

📊 ECONOMIC OUTLOOK

General Economic Assessment:

“Incoming data suggest that the economy remains solid.”

GDP and Tariffs:

“Following growth of 2.5 percent last year, gross domestic product (GDP) was reported to have edged down in the first quarter, reflecting swings in net exports that were driven by businesses bringing in imports ahead of potential tariffs.”

Domestic Demand:

“Private domestic final purchases (PDFP)… grew at a solid 2.5 percent rate.”

Consumer and Business Sentiment:

“Surveys of households and businesses, however, report a decline in sentiment over recent months and elevated uncertainty about the economic outlook, largely reflecting trade policy concerns.”

💼 LABOR MARKET

Employment and Job Growth:

“Payroll job gains averaged a moderate 124,000 per month in the first five months of the year.”

Unemployment Rate:

“The unemployment rate, at 4.2 percent in May, remains low and has stayed in a narrow range for the past year.”

Wages and Inflation:

“Wage growth has continued to moderate while still outpacing inflation.”

Overall Labor Market Conditions:

“A wide set of indicators suggests that conditions in the labor market are broadly in balance and consistent with maximum employment.”

Demographic Disparities:

“The strong labor market conditions in recent years have helped narrow long-standing disparities in employment and earnings across demographic groups.”

📈 INFLATION

Current Inflation Data:

“Estimates based on the consumer price index and other data indicate that total personal consumption expenditures (PCE) prices rose 2.3 percent over the 12 months ending in May and that, excluding the volatile food and energy categories, core PCE prices rose 2.6 percent.”

Inflation Expectations:

“Near-term measures of inflation expectations have moved up over recent months… Respondents… point to tariffs as the driving factor.”

Longer-Term Expectations:

“Beyond the next year or so… most measures of longer-term expectations remain consistent with our 2 percent inflation goal.”

🏛️ MONETARY POLICY

Current Policy Stance:

“The Federal Open Market Committee (FOMC) has maintained the target range for the federal funds rate at 4-1/4 to 4-1/2 percent since the beginning of the year.”

Balance Sheet Policy:

“We have also continued to reduce our holdings of Treasury and agency mortgage-backed securities and, beginning in April, further slowed the pace of this decline…”

Policy Outlook:

“We will continue to determine the appropriate stance of monetary policy based on the incoming data, the evolving outlook, and the balance of risks.”

Tariff Impact and Uncertainty:

“Even so, increases in tariffs this year are likely to push up prices and weigh on economic activity.”

On Possible Inflation Persistence:

“The effects on inflation could be short lived… It is also possible that the inflationary effects could instead be more persistent.”

Fed’s Responsibility on Expectations:

“The FOMC’s obligation is to keep longer-term inflation expectations well anchored…”

No Immediate Policy Change:

“For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance.”