Hearing Entitled: The Federal Reserve’s Semi-Annual Monetary Policy Report

Committee on Banking and Currency

2025-06-24

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Source: Congress.gov

Summary

The hearing focused on the Federal Reserve's semi-annual monetary policy report, addressing the current economic outlook and the Fed's strategies for achieving its dual mandate of maximum employment and stable prices [ 00:23:02 ] . Discussions covered a range of economic topics, including inflation, interest rates, the housing market, and the impact of fiscal and trade policies .

Themes

Economic Outlook and Monetary Policy

The Federal Reserve characterizes the economy as solid, with low unemployment and a labor market near maximum employment . While inflation has eased significantly from its peak, it remains somewhat above the 2% target . The FOMC has maintained the federal funds rate at 4.25% to 4.5% due to these conditions . Chairman Powell emphasized that future rate adjustments will depend on incoming data, the evolving outlook, and the balance of risks, acknowledging that inflation is still expected to rise due to tariffs .

Impact of Tariffs

Tariffs were a significant point of discussion, with concerns raised about their potential to increase prices and weigh on economic activity . While some studies suggest modest initial price adjustments , it is anticipated that tariffs will pass through to consumers, leading to higher costs for businesses and individuals, potentially over the summer . The Fed is closely monitoring these effects, noting that the persistence and magnitude of tariff-induced inflation remain uncertain .

Housing Market Challenges

Members expressed concerns regarding the housing market, citing high mortgage rates, declining new housing starts, and increased housing costs as significant burdens for American families . Chairman Powell acknowledged these challenges, stating that high rates weigh on housing activity . He reiterated that the Fed's primary objective of restoring price stability is ultimately the best long-term solution for the housing market, allowing rates to normalize .

Federal Reserve Independence and Oversight

The independence of the Federal Reserve from political interference was strongly asserted by Chairman Powell [ 01:11:04 ]

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. He stressed that the Fed's focus remains solely on its dual mandate, and it does not comment on presidential policies, elections, or fiscal issues . Several members lauded this independence, highlighting its importance for economic stability [ 01:40:58 ]

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. Discussions also touched on the need for transparency and effective congressional oversight of the Fed .

Regulatory Changes and Financial Stability

The Fed has recently taken steps to remove "reputational risk" as a component in bank exams, aiming to depoliticize supervision and focus on measurable risks . The forthcoming changes to the Supplementary Leverage Ratio (SLR) were also discussed, with expectations that these reforms will encourage bank intermediation in the Treasury market [ 01:15:53 ]

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. The Fed monitors financial stability conditions across various sectors, noting that while asset prices are high, overall leverage for corporations and households is not excessively so .

Labor Force Dynamics and Future Challenges

While the labor market is currently strong , concerns were raised about potential future labor shortages due to declining birth rates and the impact of immigration policies on workforce growth [ 01:35:42 ]

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. The transformative potential of artificial intelligence on employment was also highlighted, with a possibility of significant job displacement in the short term, though historically new technologies create new jobs over time [ 02:53:02 ]

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National Debt and Economic Data Reliability

Chairman Powell reiterated his long-standing concern that the U.S. federal budget is on an unsustainable path, though the current debt level is not yet unsustainable [ 01:13:19 ]

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. Members also raised alarms about proposed cuts to agencies like the Bureau of Labor Statistics (BLS), fearing a degradation of crucial economic data reliability that could hinder decision-making for businesses and policymakers alike [ 01:00:18 ]

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Tone of the Meeting

The meeting's tone was largely contentious and partisan, reflecting significant political divisions among members . Members frequently expressed strong, often opposing, views on the administration's economic policies, particularly tariffs, and their impact on inflation and growth . Chairman Powell maintained a consistently calm, data-driven, and independent stance, often declining to comment on political matters outside the Fed's direct mandate [ 01:11:04 ]

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. Despite the heated exchanges, there was a shared acknowledgment of the seriousness of economic challenges and the importance of the Fed's role .

Participants

Transcript

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The Honorable Jerome H. Powell
The Committee on Financial Services will come to order.  Without objection, the Chair is authorized to square a recess at any time.  This hearing is entitled the Federal Reserve Semi-Annual Monetary Policy Report.  Without objection, all members will have five legislative days within which to submit extraneous material to the Chair for inclusion in the record.   I now recognize myself for four minutes for an opening statement.  Good morning.  I want to thank Chair Powell for joining us today.  We appreciate your time and look forward to hearing more about the Federal Reserve's outlook on economic and monetary policy.  There's been a lot of rhetoric lately, particularly from our friends across the aisle, suggesting that Republicans in the Congress are steering our economy toward a recession.  However, the facts tell a different story.   Four months into the Trump administration, American workers and taxpayers are already benefiting from a strong, resilient economy.  The Fed noted that growth is solid, and even former Fed officials have dismissed the idea of a recession this year or is near.  Compare that to the previous administration.  Under President Biden, Americans endured the highest inflation rates in decades, driven by reckless spending and misguided policy decisions.   Now, under the Trump administration, inflation has declined to levels lower than those seen before President Biden's flawed so-called American Rescue Plan, and real wages are finally meaningfully growing again.   There's always some economic uncertainty when the United States engages in difficult negotiations necessary to secure more open markets for American goods and services.  But that uncertainty is not without a strategy.  A strategy of balanced, lower regulatory costs, pro-growth tax policy,   and controls on federal spending, all combined with trade successes, offer economic opportunity.  One Fed official, Governor Waller, has outlined how a balanced approach, combining potential tax rates with targeted tariffs, could foster strong economic growth.
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The Honorable Jerome H. Powell
Let me be clear on that point.  We can fight to open markets, break down non-tariff barriers while achieving solid economic growth at the same time.   That's President Trump's goal, just as it was for President Reagan in the 1980s.  I also want to commend you, Mr. Chairman, the Federal Reserve, for taking positive steps to keep politics out of the Fed, including disbanding four internal climate-related committees and making the Fed leaner and more efficient by rightsizing your workforce across the system.   These moves reflect a commitment to efficiency at the Federal Reserve.  I'm also pleased that Governor Mickey Bowman has been confirmed as Vice Chair for Supervision at the Board.  Governor Bowman has been a tireless advocate for community banks, and this committee is eager to work with her on policies that enhance our banks' ability to provide greater access to capital and services for our families and businesses across our nation.  I look forward to today's hearing, and I yield back the balance of my time.   I now recognize Mr. Foster on behalf of the ranking member for four minutes for an opening statement.
Thank you.  I will save everyone a little bit of time.  Ranking member Waters was unavoidably detained.  I'll just say a little bit that the markets have spoken on their confidence in the Trump economy.  Probably the single simplest metric of that is that the US dollar is down roughly 10%.  This is not a small thing.   has caused countries around the world to question the primacy of the US dollar going forward.  This is one of the worst market responses, I think, to the chaos that we're seeing, the tariffs that are very destructive to international trade, and just everything that the markets are seeing and trying to suffer through.  I know I'm contacted all the time   by businesses in my district, manufacturing businesses that can't even start thinking about investing with the level of chaos just from the tariff policy alone.  Anyway, there's a long set of things we should be talking about and I'm happy to save some people some time and let's get to it.   Yield back.
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The Honorable Jerome H. Powell
Gentleman yields back.  I recognize the Chairman of the Task Force on Monetary Policy, Treasury Market Resilience, and Economic Prosperity, Mr. Lucas, for one minute for an opening statement.
Thank you, Mr. Chairman.  Today's hearing will allow us to evaluate the state of the economy and review the FOMC's policy decisions.  It's appropriate to regularly take a step back and assess the central bank's performance and its responsiveness to the economic conditions our constituents face back home.  This hearing is particularly timely   conversation as the Fed wraps up its five-year framework review, including a thorough look at the consensus statement, communication strategy, and other guiding policies that will have a profound effect on the lives of every American.   Many of these topics we'll discuss today we've taken a closer look at in the Monetary Policy, Treasury Market Resilience, and Economic Prosperity Task Force.

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