Chairman Powell testifies on economic projections amid stagflation concerns

The U.S. House Committee on Financial Services convened on June 25, 2025, to discuss the Federal Reserve's Semi-Annual Monetary Policy Report, featuring testimony from Federal Reserve Chair Jerome Powell. The meeting highlighted significant economic concerns, including forecasts of slower growth, persistent inflation, and rising unemployment, raising fears of a potential stagflation scenario.

Chairman Powell emphasized the Fed's commitment to its dual mandate of achieving maximum employment and stable prices. He noted that while the economy remains solid, with a low unemployment rate of 4.2% and moderate job gains, inflation continues to run above the Fed's long-term target of 2%. Recent data indicated that personal consumption expenditures (PCE) prices rose 2.3% over the past year, with core PCE prices increasing by 2.6%.

Powell acknowledged the complexities in measuring GDP due to fluctuations in net exports and the impact of trade policies, particularly tariffs. He stated that while inflation has eased since its peak in mid-2022, it remains a concern, especially with rising inflation expectations linked to tariffs. The Fed has maintained the federal funds rate at 4.25% to 4.5% and is closely monitoring economic indicators to determine future policy adjustments.

The discussion also touched on the implications of the current administration's trade policies and fiscal measures, with some committee members expressing concerns that these factors complicate the Fed's ability to manage monetary policy effectively. Powell reiterated that the Fed's focus remains on controlling inflation and supporting employment, while avoiding direct commentary on specific fiscal policies.

In conclusion, the meeting underscored the Fed's cautious approach amid economic uncertainties, with Powell indicating that the central bank is prepared to adapt its policies based on evolving economic conditions. The committee's discussions reflect ongoing debates about the balance between fiscal and monetary policy in navigating the current economic landscape.