On February 11, Federal Reserve Chairman Powell attended a hearing before the Senate Committee on Banking, Housing, and Urban Affairs, presenting the semiannual monetary policy testimony and answering questions from lawmakers.

Full text of Powell's testimony.

Chairman Scott, senior member Warren, and all committee members,

Thank you for giving me this opportunity to present the Federal Reserve's semiannual monetary policy report.

The Federal Reserve remains steadfastly committed to achieving its dual mandate goals—maximum employment and price stability—to benefit the American people. Overall, the US economy remains strong and has made significant progress over the past two years. The overheating of the labor market has eased, but it remains robust. Inflation has come significantly close to our long-term target of 2%, although it is still slightly high. We are closely monitoring various risks under the dual mandate goals.

Before discussing monetary policy, I will first review the current economic situation.

Current Economic Situation and Outlook.

Recent data shows that economic activity continues to expand at a steady pace. In 2024, USA's Gross Domestic Product (GDP) is expected to grow by 2.5%, mainly thanks to the resilience of consumer spending. Despite a decline in investment in equipment and intangible assets in the fourth quarter, the overall performance remains solid. After a period of weakness in the middle of last year, activity in the real estate market seems to have stabilized.

The labor market remains strong and shows signs of stability. Over the past four months, the average number of new non-farm jobs added has been 0.189 million. Following a period of increase, the unemployment rate has remained stable since the middle of last year, recording 4% in January, still at a low level. Nominal wage growth has slowed over the past year, and the gap between job openings and job seekers is also narrowing. Overall, a wide range of indicators suggest that the labor market is in a balanced state and is not exerting significant pressure on inflation. The strong labor market conditions in recent years have helped narrow the long-standing employment and income gaps among different demographic groups.

Inflation has fallen significantly over the past two years but remains slightly above our long-term target of 2%. For the twelve months ending December of last year, the overall Personal Consumption Expenditures (PCE) price index increased by 2.6%, while the core PCE price index, excluding food and energy, rose by 2.8%. Various surveys (including those of households, businesses, and professional forecasters) as well as financial market indicators indicate that long-term inflation expectations remain firmly anchored.

Monetary Policy

Our MMF policy actions follow a dual mandate, which is to promote maximum employment and price stability. Since last September,the Federal Open Market Committee(FOMC) after maintaining the target Range for the federal funds rate at 5.25% to 5.5% for 14 months, the policy rate was lowered by a full percentage point. Considering the progress in inflation and the cooling of the labor market, this policy adjustment is reasonable. At the same time, we continue to reduce the size of the securities held by the Federal Reserve.

Currently, the restrictive nature of monetary policy has significantly eased, while the economy remains strong, which means there is no urgent need to adjust the policy stance. We understand that if policy restrictions are lowered too quickly or excessively, it may hinder inflation from returning to target levels; simultaneously, if the pace or extent of lowering policy restrictions is too small, it could excessively weaken economic activity and employment. Therefore, when considering whether to further adjust the federal funds rate target range, the FOMC will comprehensively assess the latest data, changes in the economic outlook, and the balance of risks.

As the economy develops, the Federal Reserve will adjust its policy stance to maximize employment and price stability. If the economy remains strong and inflation does not consistently revert to 2%, we can maintain the current policy restrictions for a longer period. If the labor market unexpectedly weakens or inflation declines faster than expected, we can appropriately ease policy. We are always aware of the risks to our dual mandate and ensure that our policy can effectively respond to current uncertainties.

This year, the Federal Reserve is conducting its second regular review, focusing on assessing its monetary policy strategy, tools, and communication mechanisms, which are the frameworks used to achieve the dual mandate of maximum employment and price stability granted by Congress. The core of this review is the FOMC's "Statement on Longer-Run Goals and Monetary Policy Strategy," which outlines the Committee's monetary policy approach and its communication tools. This review will not involve the 2% long-term inflation target, which will remain unchanged.

Our review will include extensive external communication and public activities, such as holding "Fed Listens" events nationwide and a research conference in May. We will summarize the lessons learned over the past five years and adjust policy approaches as necessary to better serve the people of the USA and fulfill our responsibilities. This review is expected to be completed by the end of summer.

Conclusion

Finally, I want to emphasize that the Federal Reserve will make every effort to achieve the monetary policy goals set by Congress—maximum employment and price stability. We are consistently committed to supporting maximum employment, promoting a sustainable return to the 2% inflation target, and maintaining the stability of long-term inflation expectations. We are well aware that the Federal Reserve's policies impact communities, families, and businesses across the nation, and every decision we make is based on the mission of serving the public interest.

Thank you all, and I look forward to answering your questions.

Editor/ping