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Federal Reserve Chair Jerome Powell on Wednesday reinforced a message that the Fed is paying growing attention to a slowing job market and not only to taming inflation, a shift that signals it\u2019s likely to begin cutting interest rates soon.<\/p>\n
\u201cWe\u2019re not just an inflation-targeting central bank,\u201d Powell told the House Financial Services Committee on the second of two days of semi-annual testimony to Congress. \u201cWe also have an employment mandate.\u201d Powell made his remarks days after the unemployment rate hit 4.1%<\/a>, the highest level in over three years and an indication the U.S. could be on the brink of a recession. <\/p>\n On Tuesday, when Powell addressed the Senate Banking Committee<\/a>, he suggested that the Fed had made \u201cconsiderable progress\u201d toward its goal of defeating the worst inflation spike<\/a> in four decades and noted that cutting rates \u201ctoo late or too little could unduly weaken economic activity and employment.\u201d<\/p>\n Congress has given the Fed a dual mandate: To keep prices stable and to promote maximum employment.<\/p>\n \u201cFor a long time,\u201d Powell said Wednesday, \u201cwe\u2019ve had to focus on the inflation mandate.\u201d As the economy roared out of the pandemic recession, inflation hit a four-decade high in mid-2022. The Fed responded by raising its benchmark rate 11 times in 2022 and 2023. Inflation has since plummeted<\/a> from its 9.1% peak to 3.3%. <\/p>\n The U.S. economy and job market have continued to grow, defying widespread predictions that much higher borrowing costs resulting from the Fed\u2019s rate hikes would cause a recession. Still, growth has weakened this year. From April through June, U.S. employers added an average 177,000 jobs a month<\/a>, the lowest three-month hiring pace since January 2021.<\/p>\n Powell told the House panel on Wednesday that to avoid damaging the economy, the Fed likely wouldn\u2019t wait until inflation reached its 2% target before it would start cutting rates.<\/p>\n Markets cheered the Fed\u2019s more dovish turn, with the S&P 500 up 0.7% as of 1:30 p.m. Eastern Time, and on track to set its 37th all-time high this year. The Dow<\/a> Jones Industrial Average was up about or 0.5%, and the Nasdaq<\/a> composite was adding 0.9% to its own record.<\/p>\n Most economists have said they expect the Fed\u2019s first rate cut to occur in September. Powell this week has declined to say when he envisions the first cut.<\/p>\n Under questioning from several Republican lawmakers, Powell said the Fed and other financial regulators will overhaul a 2023 proposal, known as the \u201cBasel III endgame,\u2019\u2019 that would raise the amount of capital that banks are required to hold against potential losses.<\/p>\n Large banks have aggressively fought against the stricter requirements, which emerged in the aftermath of the 2007-2008 financial crisis. They have warned that the tighter rules would force them to cut lending to consumers and businesses, potentially imperiling the economy.<\/p>\n Powell said the three main U.S. bank regulators \u2014 the Fed, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency \u2014 were near agreement on a new version that would be subject to public comment.<\/p>\n<\/div>\nStill adding jobs\u2014at a slower pace<\/h2>\n
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