Even though the Federal Reserve left interest rates alone at its meeting last week, the central bank is expected to raise rates again later this year, Fed Chair Jerome Powell said while giving testimony on Capitol Hill on Wednesday.
"Inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go," Powell told the House Committee on Financial Services.
The Fed had raised interest rates 10 times since 2022 in an attempt to bring inflation to its 2% target. By pausing the rate hikes in June, the central bank has given itself time to see how its previous rate increases have affected the economy.
"Nearly all FOMC [Federal Open Market Committee] participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year," Powell said Wednesday.
"But at last week's meeting, considering how far and how fast we have moved, we judged it prudent to hold the target range steady to allow the Committee to assess additional information and its implications for monetary policy," Powell added.
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INFLATION SHRINKS SUMMER VACATION BUDGETS FOR MANY AMERICANS, SURVEY SAYS
Although the economy slowed down last year, indicators have shown that the economy is still expanding, Powell said on Wednesday.
The Consumer Price Index (CPI) in May showed that consumer prices continued to rise, but at less than half the pace from last year.
And though the economy continued to add jobs in May, the unemployment rate increased, according to the latest jobs data by the Bureau of Labor Statistics (BLS).
Meanwhile, mortgage rates have fallen for the third week in a row, according to data from Freddie Mac. That’s a good sign for the housing market over the next few months, according to Keeping Current Matters Chief Economist George Ratiu.
"This summer’s housing market shows signs of normalizing in the wake of an unprecedented period," Ratiu said in a statement.
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During his testimony before Congress, Powell addressed concerns about the banking sector in the wake of the collapse of Silicon Valley Bank (SVB) and Signature Bank earlier this year.
"The U.S. banking system is sound and resilient," Powell said.
After SVB collapsed, the Fed, the Treasury Department and the Federal Deposit Insurance Corporation (FDIC) made sure that all depositors had access to all their funds in the bank, rather than the typical $250,000 maximum covered for deposit protection.
On Wednesday, Powell said the move was meant to "protect the U.S. economy and to strengthen public confidence in our banking system."
"The recent bank failures, including the failure of Silicon Valley Bank, and the resulting banking stress have highlighted the importance of ensuring we have the appropriate rules and supervisory practices for banks of this size," Powell said. "We are committed to addressing these vulnerabilities to make for a stronger and more resilient banking system."
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AMERICANS ANXIOUS ABOUT MONEY SAFETY AFTER BANK FAILURES: SURVEY
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