Chair Powell’s Insights: Key Takeaways from the Semiannual Monetary Policy Report to Congress

Thank you, Chairman Hill, Ranking Member Waters, and everyone here. I appreciate the chance to share the Federal Reserve’s latest Monetary Policy Report.

Right now, the Federal Reserve is focused on two main goals: keeping jobs plentiful and ensuring prices stay stable for Americans. Despite some uncertainty, the economy looks strong. Unemployment is low, and we are close to maximum employment. Inflation has dropped compared to last year, but it’s still a bit above our target of 2 percent. We’re monitoring the risks to these goals closely.

Current Economic Situation

Overall, the economy appears robust. Last year, we saw growth at 2.5%. This year, the first quarter showed a slight dip in GDP mainly due to shifts in trade and businesses preparing for possible tariffs. This made it tricky to measure GDP accurately. However, private domestic final purchases, which exclude trade and certain investments, rose by 2.5%. Consumer spending has cooled down a bit, but equipment investments are bouncing back after a slow patch in the last quarter.

While the job market remains strong, recent surveys suggest people are feeling less optimistic about the economy, often due to trade policy worries. How this affects future spending is still unclear.

On jobs, we’ve seen about 124,000 new positions added each month this year. The unemployment rate was at 4.2% in May. Wage growth continues, even if it’s slowing, and overall, the labor market is in good shape. This stability has also helped close gaps in employment and earnings among different demographic groups.

Inflation is much lower than its peak in mid-2022 but still higher than our goal. In May, personal consumption expenditures rose by 2.3% over the past year, while core prices, which exclude food and energy, increased by 2.6%. Recently, inflation expectations have risen primarily due to concerns about tariffs, though long-term expectations still align with our 2% goal.

Monetary Policy Approach

The Federal Open Market Committee (FOMC) guides our monetary policy with the goal of balancing employment and price stability. Currently, the target range for the federal funds rate is set at 4.25% to 4.5%. We are also gradually reducing our holdings of Treasury and mortgage-backed securities to ensure smooth financial operations. Future policy adjustments will be made based on new data and evolving economic conditions.

Policy effects can be unpredictable. The impact of tariffs, for instance, will depend on their levels. Anticipations peaked in April but have since lessened. Even so, new tariffs may increase prices and slow down economic activity.

The inflation effects might only last for a short time due to a one-time price level shift. However, if these effects linger, it could complicate our efforts to maintain price stability. Ensuring long-term inflation expectations remain anchored is crucial in preventing short-term price jumps from becoming a long-lasting issue.

We aim to balance our responsibilities carefully. Without stable prices, we can’t enjoy a consistent job market that benefits everyone. For now, we’ll monitor and wait for more economic data before deciding on any policy changes.

In closing, we know our decisions impact communities, families, and businesses nationwide. Everything we do focuses on serving our public mission to achieve our goals of maximum employment and price stability.

Thank you for your attention. I am open to your questions.

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