Powell Testifies Before Senate on Economic Policies Amid Uncertainty

WASHINGTON, Feb. 11, 2025 – U.S. Federal Reserve Chair Jerome Powell testified before the Senate Banking Committee today, addressing the state of the economy and the implications of President Donald Trump’s policies during the first weeks of his administration. The hearing focused on the Semiannual Monetary Policy Report to Congress, marked by a backdrop of uncertainty surrounding tariffs, immigration, and regulatory changes.

Powell’s assessment of the economy was optimistic, highlighting a 4% unemployment rate and inflation nearing the Fed’s 2% target. “We are in a pretty good place with this economy,” Powell stated, indicating that while the Fed was not rushing to adjust interest rates, it remained alert to potential shifts in inflation and the job market.

During the nearly two-hour session, senators raised concerns about various policies that could impact economic stability, including Trump’s plans to impose new tariffs on imports. Powell addressed these questions, noting that while the Fed monitors inflation closely, it is not the Fed’s role to comment on tariff policy. “It’s not the Fed’s job to make or comment on tariff policy… Our role is to react to it thoughtfully,” he explained.

Among the major issues discussed was the Federal Reserve’s core mission of managing inflation and employment stability. Senators sought Powell’s insights on how proposed tariffs could lead to higher inflation. He acknowledged that the potential inflationary effects depend largely on specific tariffs and their consumer impact. “Higher inflation is a possible outcome which will depend very much on specific facts,” he said.

Kathy Bostjancic, chief economist at Nationwide, commented on Powell’s testimony, stating that given the uncertainty in the economy, she anticipated only one rate cut from the Fed for the year, likely in the second half.

As the hearing progressed, Powell also addressed concerns raised about financial security and the implications of the administration’s efforts to limit regulatory oversight. Lawmakers questioned him regarding the future of the Consumer Financial Protection Bureau, which was established to oversee compliance with consumer protection laws. Powell reassured senators that the Fed remains committed to its dual mandate of stable inflation and maximum employment.

The testimony comes as Powell prepares for a follow-up appearance before the House Financial Services Committee. In his prepared remarks for that hearing, he noted the economy’s strong overall performance and significant progress toward the Fed’s goals over the past two years. “We know that reducing policy restraint too fast could hinder progress on inflation,” Powell said.

As markets await new consumer price data, the Fed’s decisions on interest rates remain closely monitored. Powell emphasized that while the Fed holds a steady course, it is equipped to address economic shifts as they arise.