Powell tells US Senate Fed won’t rush rate cuts
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The news: Federal Reserve Chair Jerome Powell told the US Senate Banking Committee the central bank is in no rush to lower interest rates, saying the economy remains strong with inflation still above target.
Powell repeated warnings that reducing policy restraint too quickly could hinder inflation progress, while moving too slowly could weaken economic activity and employment.
"We are attentive to the risks to both sides of our dual mandate, and policy is well positioned to deal with the risks and uncertainties that we face," he said.
He said the level of capital that the largest banks are required to hold is “about right” and said the US payments system remains safe but that the central bank played no decisional role in that system.
Powell was probed on financial regulation and the Trump administration's ongoing efforts to shut of the Consumer Financial Protection Bureau (CFPB).
In response to a question from Senator Elizabeth Warren, Powell said "no other federal regulator" is responsible for enforcing consumer protection laws in banking, following the Trump administration’s decision to halt CFPB enforcement.
Lawmakers also questioned Powell on tariffs and economic risks posed by Trump administration policies.
Powell said the Fed acts only as the Treasury’s fiscal agent to help the US government pay its bills, but plays no role in making decisions on federal payments. He declined to comment on the economic impact of new tariffs, saying, "It would be irresponsible to speculate."
The numbers: The yield on 10-year Treasuries rose three basis points to 4.53% following Powell’s comments, according to Bloomberg. Its Dollar Spot Index declined 0.2%. Investors continued to fully price in just one quarter-point rate cut by September.
Stocks fell after the comments but had recovered by late afternoon.
What they said: “We do not need to be in a hurry to adjust our policy stance,” Powell said. "The economy is strong overall and has made significant progress toward our goals over the past two years."
"The standard case for free trade... logically still makes sense. But it's not the Fed's job to make or comment on tariff policy... Ours is to try to react to it in a thoughtful, sensible way."
"I think the level of capital that the largest banks are required to hold is about right."
“The US federal budget is on an unsustainable path,” Powell said. “There is no time like the present to start working on this.”
Regarding the Fed’s role in federal payments, he said: "We make no judgments whatsoever. Those are all made upstream from us."
When senator Elizabeth Warren asked who is currently ensuring consumer protection in banking if the CFPB is not operational, he said: "No other federal regulator."
The sources: Bloomberg, US Senate Banking Committee
