This week, Federal Reserve Chairman, Jerome Powell spent two days giving a congressional testimony. According to the Wall Street Journal, the testimony made certain aspects of the Fed’s monetary policy very clear.
First and foremost, Powell is prepared to cut interest rates in July, which was made clear when he emphasized his concerns about global growth and trade uncertainty.
More, the Fed is anxious about having near-zero rates. A historical example can be found in Japan, 15 years ago. The country had interest rates that were near zero, which tightly restricted the economy’s ability to grow and fight off a recession. Powell used this example in his testimony to explain why it was key that inflation be kept at the Fed’s target of 2%.
Powell sees areas for improvement in the labor market. He denied that the labor market was too hot or too tight. “To call something hot, you need to see some heat,” he explained. “While we hear lots of reports of companies having a hard time finding qualified labor, nonetheless we don’t see wages really responding.
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