S&P 500 set to hit record high as Powell kicks off semiannual testimony

Federal Reserve Chairman Jerome Powell kicked off his semiannual briefing to Congress Tuesday before the Senate Banking Committee. He will appear before the House Financial Services Committee tomorrow.

Yahoo Finance’s Jennifer Schonberger tells the story:

Powell indicated the central bank was moving closer to some confidence in interest rate cuts, saying he was encouraged by signs of lower inflation and that more “good data” would help the Fed get to the level it wants.

Inflation figures “showed some further modest progress” after higher readings in the first quarter, “and more good data would strengthen our confidence that inflation is moving sustainably toward 2%,” he said in prepared testimony to U.S. lawmakers on Tuesday.

This is the second time in a week that Powell has sounded optimistic about the inflation picture. Last Tuesday, he noted that the last two inflation numbers, from April and May, “suggest that we are returning to a disinflationary path.”

The next reading on inflation as measured by the consumer price index is due out on Thursday.

Inflation is not expected to get worse, but it is not expected to fall either. Based on the “core” CPI—which excludes volatile food and energy prices that the Fed cannot control—inflation is expected to hold steady at 3.4% in June, up from the same level in May.

Powell said in his testimony that the Fed would continue to make monetary policy decisions on a meeting-by-meeting basis. He reiterated that cutting rates too quickly could reverse progress made in reducing inflation, while keeping rates high for too long could weaken the economy and the jobs market.

Democrats are expected to pressure Powell to cut rates soon, while Republicans are likely to press Powell on bank capital rules and stress that rates should not be cut too close to the November election.

In his testimony, Powell stressed that Congress has given the Fed the operational independence needed to take a “longer-term view” in pursuing its dual mandate of full employment and stable prices.