March 7 (UPI) — Federal Reserve Chair Jerome Powell told the Senate Banking Committee Thursday the U.S. economy is strong and is in better condition than any other major world economy.
“The economy is growing at a healthy, sustainable, solid, strong pace,” Powell said during the hearing. “We’re doing the best of anybody. We’ve got the strongest growth and the lowest inflation of the advanced economies.”
That sunny description is based on PCE inflation at a 2.4% annual rate, as well as Gross Domestic Product projected growth of 2.5% in the first quarter of this year. Unemployment levels remain historically low at 3.7%.
And, in light of the positive economic outlook, Powell said the Fed is looking to lower interest rates this year when inflation moves sustainably to 2%, which he said is not far off.
The Senate testimony was Powell’s second day of testimony in Congress.
He told the House Finance Committee Wednesday that inflation has eased substantially with still-strong job creation and said that, while it’s too early to cut interests rates immediately, if economic progress continues as expected, the rate cuts could happen later in 2024.
And Powell said economic activity expanded at a strong pace over the past year, too.
“For 2023 as a whole, GDP increased 3.1% bolstered by solid consumer demand and improving supply conditions,” Powell said in his Senate testimony. “Activity in the housing sector was subdued over the past year, largely reflecting high mortgage rates ….
“The labor market remains relatively tight, but supply and demand conditions have continued to come into better balance,” he said.
Powell said job creation averaged 239,000 jobs per month. He said although the jobs-to-workers gap has narrowed, labor demand still exceeds the supply of available workers.
Powell said inflation has eased notably over the past year but remains over the Fed’s goal of 2%.
He said cutting interest rates too soon or too much could reverse the progress on inflation that’s been achieved and lead to even higher rates to return inflation back to 2%.
“At the same time, reducing policy restraint too late or too little could unduly weaken economic activity and employment,” Powell said.
Addressing commercial real estate problems that have stressed some banks, Powell agreed with Treasury Secretary Janet Yellen that there will be some failures, but it will be manageable, he said.
Powell said the Fed is communicating with banks to ensure they are aware and are on top of possible losses in that sector.
