Divisions within the Federal Reserve? At the center of the storm, Powell is about to face a congressional hearing that can be called the "most difficult in history."
At 10 PM Beijing time on Tuesday and the same time on Wednesday, Federal Reserve Chairman Powell will testify before the House Financial Services Committee and the Senate Banking Committee. This appearance is highly anticipated as he needs to explain to Congress the decision to maintain interest rates.
Less than a week ago, Federal Reserve officials decided to maintain interest rates for the fourth consecutive meeting, keeping the benchmark federal funds rate in the range of 4.25% to 4.5%. Prior to this, the U.S. attack on Iran led to a spike in oil prices and increased global economic risks, making the market more sensitive to interest rate trends.
Trump has been strongly advocating for lower borrowing costs, arguing that U.S. interest rates should be "at least two to three percentage points lower," and has called on Congress to "take action" against Powell, accusing him of making decisions that will cost the U.S. for years to come.
In Powell's prepared remarks and Q&A session, interest rates and the economy will be key topics. He is expected to follow last week's information, indicating that the Federal Reserve is in a wait-and-see mode before considering interest rate changes, wanting to gather more data as the current economy remains robust. Currently, tariffs imposed by the Trump administration have not led to significant price increases or rising unemployment rates. Economists expect data this week to show that the Fed's preferred core inflation indicator rose only 0.1% in May, marking the third consecutive month of such an increase, and representing the mildest inflation growth in three months since 2020. However, two Federal Reserve governors, Waller and Bowman, believe that the impact of tariffs on prices is temporary and may support a rate cut in July, but Powell seems to see no urgency in acting on inflation trends, believing that misjudging risks is significant.
Powell's testimony in Congress not only has to contend with pressure from Trump but also must address market concerns about the direction of interest rates. His statements and positions will have a significant impact on the U.S. and global economic and financial markets, and investors and market participants are closely monitoring the signals he conveys.