Fed’s Powell says US making ‘modest’ progress on inflation

Chair of the Federal Reserve of the United States Jerome Powell speaks during a Senate Banking, Housing, and Urban Affairs Committee hearing on the Semiannual Monetary Policy Report to Congress at the U.S. Capitol on July 9, 2024 in Washington, DC. Powell in earlier remarks was quoted, “we want to be more confident that inflation is moving sustainably down toward 2% before we start the process of reducing or loosening policy.” (Photo by Bonnie Cash / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)

Washington, United States — The US Federal Reserve is making “modest” progress in its inflation fight, the head of the US central bank told lawmakers Tuesday, on the first of two days of testimony in Congress.

When prices surged in the wake of the Covid-19 pandemic, the Fed responded by hiking interest rates to a two-decade high as it attempts to cool down the US economy and return inflation to its long-term target of two percent.

Inflation has eased significantly since it peaked in 2022, but progress stalled in the first quarter of this year, effectively putting the Fed’s fight on pause.

READ: US Fed has made ‘quite a bit of progress’ on inflation: Powell

The data in the second quarter has been more encouraging, prompting some cautious optimism from some policymakers in recent weeks.

Speaking to lawmakers in Washington, Fed Chair Jerome Powell said most recent readings “have shown some modest further progress” since the first quarter of the year.

“More good data would strengthen our confidence that inflation is moving sustainably toward two percent,” he added during his appearance in front of the Senate Banking Committee to discuss the Fed’s semi-annual monetary policy report.

Powell is likely to face tough questions from lawmakers on Tuesday — and again the following day in the House of Representatives — about the impact of the Fed’s high interest rates on everyday Americans.

READ: US Fed officials stressed ‘patience’ on rate cuts: minutes

The Fed is widely expected to remain on pause when it meets to set interest rates later this month, but could begin cutting rates in September.

Futures traders have assigned a probability of more than 75 percent that the Fed will make its first rate cut by mid-September, according to CME Group data.

They also see it as more likely than not that the Fed will make another quarter percentage-point cut by the end of the year.