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Powell: Fed reviewing framework as inflation nears target, will adjust policy by data
Summary
Federal Reserve Chair Jerome Powell told the House Financial Services Committee the Fed has made progress on inflation, is conducting a five‑year review of its monetary policy framework and will “adjust our policy stance” based on incoming data and risks to the dual mandate of maximum employment and price stability.
Federal Reserve Chair Jerome Powell told the House Financial Services Committee that the central bank remains focused on its dual mandate of maximum employment and price stability and will finish a review of its monetary policy framework by late summer.
The Fed has made progress bringing inflation down from its peak, Powell said, but inflation remains above the Committee’s 2 percent longer‑run goal. “We will adjust our policy stance in a manner that best promotes our maximum employment and price stability goals,” Powell said in his opening testimony. He added that the FOMC will assess incoming data and the balance of risks when deciding the extent and timing of further adjustments.
Why it matters: The review Powell described could affect how the Fed interprets inflation readings and which tools it prioritizes when responding to future shocks. Powell said the Committee will retain the 2 percent longer‑run goal while reassessing its statement on longer‑run goals, strategy, and communications.
Key points from testimony and members’ questions
- Economic backdrop: Powell described the economy as “strong overall,” with labor market conditions that have cooled from earlier overheating and PCE inflation nearer to—but still above—2 percent. He said payroll gains have averaged roughly the recent monthly pace over the last four months and the unemployment rate had stabilized.
- Policy stance and path: Since last September the FOMC lowered the policy rate by a full percentage point from its peak and reduced securities holdings; Powell said that with policy now “significantly less restrictive” than its peak level, the Fed does not need to rush further adjustments but will act if incoming data warrant change.
- Framework review: Powell said the Fed’s second periodic review of strategy, tools, and communications will include outreach, Fed Listens events, and a research conference, and that the Committee expects to conclude the review by late summer.
- On communications and rules: Members pressed Powell on whether the Fed should rely more on monetary policy rules (for example, Taylor‑type rules) when setting policy. Powell responded that rules are useful starting points but not determinative, and that the Committee would take lessons from the past five years into account.
Ending: Powell closed by reiterating the Fed’s public mission: to support maximum employment and bring inflation sustainably to 2 percent while keeping longer‑term inflation expectations anchored.
