Economic Trends: Jerome Powell contemplates rate cuts as Fed assesses inflation.

This week Jerome Powell, chairman of the Federal Reserve, gave his semi-annual testimony in front of U.S. lawmakers. In it, Powell said that recent increases in inflation data have not changed his stance for the time being and that it will probably be appropriate to cut interest rates later this year. At the same time, he added that while inflation has declined markedly, it remains elevated. The economy is on track and the Fed is not far from being confident enough that inflation is falling toward its 2% target to begin cutting rates. Markets were relieved by those comments as Powell, rather than taking a more hawkish approach, reiterated much of what he said following the January FOMC meeting prior to the release of the higher-than-expected February inflation data. Regarding banking regulations, Powell indicated that after intense lobbying efforts, the Fed is ready to rework its plan to force large banks to hold more capital. Finally, he stressed that the U.S. banking system can withstand the threats posed by commercial real estate.

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