‘We’re doing the best of anybody’: Powell delivers sunny economic outlook to Congress

Fed Chairman Jerome Powell sounded upbeat about the outlook for the U.S. economy during two days of testimony on Capitol Hill, during which he said little about the risks of a recession and expressed little concern about a recession. Gone.

“The economy is healthy, sustainable, growing at a solid and strong pace,” Powell said at a Senate Banking Committee hearing Thursday, noting that the U.S. is in better shape than any other major economy in the world. did.

“We are doing the best we can than anyone else. Our country has the strongest growth and lowest inflation of any developed country,” he said.

Economic data supports Powell’s optimistic view. Inflation, the target of the Fed’s rapid rate-tightening cycle over the past two years, has fallen to an annual rate of 2.4%, as measured by the personal consumption expenditures (PCE) price index.

The unemployment rate is 3.7%, near historic lows, and economic growth has added an average of 239,000 jobs a month since last summer. Gross domestic product (GDP) is 2.5% in the first quarterafter rising 3.2% in the fourth quarter and 4.9% in the third quarter of last year.

Businesses are raking in cash, and corporate profits are taking a hit. 3.4 percent That will happen in the third quarter, according to Commerce Department data. Profits remain well above pre-pandemic levels, marking the second time in history they exceeded $3 trillion in the third quarter. 10 years before the pandemic Profits remain at around $2 trillion Seasonally adjusted quarterly.

Lawmakers from both parties agreed with Mr. Powell’s outlook, going so far as to describe in miraculous terms an economic situation that many had expected to worsen at this point.

“I hear a lot of people talking about the American economic miracle,” Sen. J.D. Vance (R-Ohio) said at a Senate banking hearing.

“It’s important that people realize that these companies are doing better than ever,” said Sen. Chris Van Hollen (D-Md.).

After three years of high inflation, public opinion regarding the economy is starting to turn for the better. A January poll by Pew found that 26% of respondents expected economic conditions to improve within a year, up from just 17% in April of last year.

A New York Times/Siena College poll released Saturday found just over a quarter of registered voters say the economy is good or excellent, an increase of 6 points from July.

According to a University of Michigan benchmark study, consumer sentiment was stable in January, but has improved significantly over the past three months, with an overall upward trend starting in mid-2022.

Mr. Powell faced criticism from Democrats in his confirmation hearing this week over housing costs, which have risen due to Fed interest rate hikes and where much of the inflation remains.

Republicans in both chambers of Congress blasted Mr. Powell over a package of banking regulations known as Basel III that would raise capital requirements for banks and aim to shore up bank stability after last year’s turmoil.

Mr. Powell surprised many by saying that the international regulatory framework, which has been in the making for years, could be scaled back or even scrapped and completely re-proposed.

The admission received harsh criticism from financial champion Sen. Elizabeth Warren (D-Mass.).

“According to public reports, you are promoting an effort within the Fed to weaken capital rules. “I even said I thought it was plausible,” she said.

Chairman Powell on Thursday described the new rules as “long-term” and said he planned to make “significant and far-reaching changes” to them.

Lawmakers in both chambers also expressed concern about the commercial real estate sector, which has declined in value and is at risk of defaulting on its debts to creditors. Powell acknowledged problems in the financial sector related to office space, saying “bank failures are going to happen,” but said the impact on small banks was manageable and would be contained.