Full Text of Powell's Testimony: Inflation Makes Further Moderate Progress

Chairman Brown, Senior Commissioner Scott, and other members of the committee, I am pleased to have the opportunity to present the Federal Reserve's semi-annual monetary policy report.

The Federal Reserve remains focused on our dual mandate of promoting maximum employment and price stability for the benefit of the American people. Over the past two years, significant progress has been made towards our 2% inflation target with labor market conditions remaining strong but cooling down. Given these developments, risks associated with achieving employment and inflation targets are being better balanced.

Before discussing monetary policy, I will review current economic conditions.

Current Economic Conditions and Outlook

Recent indicators show that U.S. economy continues to expand at a robust pace. After impressive growth in second half of last year, GDP growth seems to have slowed in first half this year. However private domestic demand remains strong; consumer spending growth has slowed but is still solid. So far this year we've seen moderate capital expenditure growth and a rebound in residential investment. Improvements in supply conditions over past year have supported resilient demand and strong performance of US economy.

In labor market wide range indicators suggest situation has returned to pre-pandemic levels: strong but not overheating. Unemployment rate increased slightly but remained low at 4.1% in June . In first half this year an average of 222 thousand jobs were added each month . Strong job growth over past few years accompanied by increase in labor supply mainly reflected rise participation rate among individuals aged 25-54 as well as robust immigration . As result gap between job openings workers now much lower than peak only slightly above level seen 2019 Nominal wage growth slowed over past year A strong labor market helped narrow long-standing gaps employment income across different demographic groups

Inflation eased significantly over recent years , yet it remains above Fed's long-term target of 2%. Over twelve months ending May personal consumption expenditures (PCE) prices rose by 2.6%. Core PCE, which excludes volatile food and energy categories, also increased by 2.6%. Earlier this year we made no progress towards our 2% inflation target but recent monthly data show moderate further progress. Long-term inflation expectations appear to remain well-anchored based on broad surveys of households, businesses and forecasters as well as financial market indicators.

Monetary Policy

Our monetary policy actions are guided by our dual mandate to promote maximum employment and price stability for the American people. To support these goals, the Committee has maintained the target range for federal funds rate at between 5.25% - 5.5% since last July after significantly tightening its monetary policy stance over previous one-and-a-half years . We have also continued reducing our securities holdings . At May meeting , we decided slow pace balance sheet reduction starting June consistent previously announced plan Our restrictive monetary policy stance helps better balance demand supply conditions exert downward pressure on inflation

The Federal Open Market Committee stated that it is inappropriate to lower the target range for federal funds rate until we have greater confidence in sustained move towards 2% inflation . Data released first quarter did not support such increase confidence However recent inflation data showed some moderate further progress More good data will boost our confidence that inflation is moving sustainably towards 2%.

We continue making decisions step-by-step We recognize too early or excessive easing of policy constraints could delay even reverse progress made on inflation Conversely given advances past two years lowering inflation cooling labor market rising prices not only risk face Delaying or insufficient easing of policy constraints could overly weaken economic activity employment When considering adjustments target range federal funds rate committee will continue carefully assess incoming data their implications evolving outlook balance risks appropriate path monetary policy

Congress granted Fed operational independence necessary take longer term view pursuit dual mandate maximum employment stable prices We remain committed bringing down inflation rate to targeted level maintaining stability long-term expected rates Restoring price stability crucial achieving maximum employment long-term price stability Whether we can successfully achieve these goals matters to all Americans

Finally I want emphasize that we understand our actions affect communities families businesses across country Everything we do is for our public mission

Thank you! I am ready to answer your questions.