Federal Reserve Chairman Jerome Powell reiterates commitment to anti-inflation, signaling no interest rate cuts in the short term

According to the Zhitong Finance APP, Federal Reserve Chairman Jerome Powell reiterated on Tuesday during his testimony before the Senate Banking Committee that the Federal Reserve is committed to reducing the inflation rate to its target level of 2%, while suggesting that policymakers are not in a hurry to cut interest rates.

In his testimony, Powell noted that the U.S. economy is "overall strong," the labor market remains "solid," and inflation has eased but is still above the Federal Reserve's target level. Therefore, he stated that there is no need for the Federal Reserve to rush to adjust monetary policy.

"Given that the current policy stance has already been significantly relaxed and the economy remains strong, we do not need to rush to adjust policy," Powell said. "If we loosen policy too quickly or excessively, it could affect the process of inflation decline; but if the pace or magnitude of loosening is too slow, it could excessively weaken economic activity and the labor market."

Powell's remarks are generally consistent with recent statements from Federal Reserve officials, and the market widely interprets this as an indication that the Federal Reserve will maintain interest rates unchanged in the short term, with no further action expected at least before this summer. The Federal Reserve cut interest rates by a cumulative 1 percentage point in the second half of last year, and the current target range for the federal funds rate remains at 4.25%-4.5%.

He pointed out that the current policy stance provides the Federal Reserve with flexibility to balance the dual goals of economic growth and inflation control. "We are concerned about the uncertainty of the economic outlook and believe that the current policy stance can effectively address risks," Powell said.

At the Federal Reserve's meeting at the end of January this year, it was decided to maintain interest rates unchanged, and market analysts believe that the Federal Reserve is unlikely to adopt new easing policies before inflation declines further.

Another major focus of the market is the series of trade policies promoted by Trump. The Trump administration recently initiated a new round of tariff actions, imposing tariffs on major trading partners of the U.S. in an attempt to balance economic competition while using economic means to pressure issues related to illegal immigration and drug smuggling, particularly the control of fentanyl.

Although Powell did not directly mention the tariff issue in his testimony, the market expects him to face questions from lawmakers about trade policies and their impact on inflation during the congressional hearing.

Recently, U.S. long-term Treasury yields remain high, which has also led to mortgage rates not declining in sync with the Federal Reserve's rate cuts. Powell emphasized in his remarks that the Federal Reserve's interest rate policy has a significant impact on short-term rates, while mortgage rates are more influenced by long-term bond yields.

"Indeed, current mortgage rates are still relatively high, but this is not entirely a direct result of the Federal Reserve's interest rate policy," Powell explained. "It is more related to long-term Treasury yields, especially the yields on 10-year and 30-year U.S. Treasuries. The high levels of these long-term rates are less affected by Federal Reserve policy."

However, Powell also stated that as the Federal Reserve maintains lower interest rates for a period of time in the future, mortgage rates may decline, but the specific timing remains uncertain.

In addition to the Senate Banking Committee hearing, Powell will also testify before the House Financial Services Committee on Wednesday, and the market is expected to pay further attention to his statements on monetary policy, inflation trajectory, and financial market stability At the same time, the Trump administration recently expressed differing opinions on Federal Reserve policy. Trump publicly stated after taking office that he "requested" the Federal Reserve to cut interest rates immediately, but later indicated support for maintaining the current interest rate level. Treasury Secretary Mnuchin pointed out that the government is more concerned about changes in the 10-year U.S. Treasury yield rather than the Federal Reserve's short-term interest rate adjustments