Federal Reserve Chair Jerome Powell told members of Congress on Wednesday that the U.S. “economic activity has continued to expand at a solid pace.” Gross Domestic Product (GDP) rose by 2.5% in 2024, driven by resilient consumer spending. And the Fed will not bend to outside pressure and will maintain its independence, Powell said.
Investment in equipment and intangibles showed a decline in the fourth quarter but remained strong for the year overall, Powell said in his semi-annual remarks to Congress. The housing sector, after experiencing a slowdown, appears to have stabilized.
Higher borrowing costs stalled the market, especially after so many homeowners refinanced and locked into rates that may be less than half of current rates.
Labor market conditions have cooled from their previously overheated state but remain solid. Inflation has moved much closer to the Federal Reserve's 2% longer-run goal, though it remains somewhat elevated.
A January rise of 0.4% in the Producer Price Index meant the past year has experienced a 3.5% increase. Egg and diesel fuel prices were among the pressures that drove the PPI increase.
RELATED: UPI News investigates the Producer Price Index and the factors that led to its elevated level. Read that here.
Powell again cautioned those who expect the Fed to drop borrowing rates quickly. “With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” he said. “We know that reducing policy restraint too fast or too much could hinder progress on inflation.”
But he added that the Fed can’t wait too long to take additional action. “At the same time, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the FOMC (Federal Open Market Committee) will assess incoming data, the evolving outlook, and the balance of risks.”
RELATED: Jerome Powell talks frequently about the need for the Fed’s independence. Investopedia reported on his comments concerning Elon Musk’s push for an audit. Powell views that as a threat.
Powell knows that President Donald Trump wants the FOMC to lower interest rates. “Interest Rates should be lowered, something which would go hand in hand with upcoming Tariffs!!!” Trump posted on Truth Social.
But Powell has maintained that the Fed’s actions must be guided by data and not by political pressure.
“People can be confident that we’ll continue to keep our heads down, do our work, and make our decisions based on what’s happening in the economy,” Powell said.
RELATED: This Associated Press article has details of Jerome Powell’s comments that the Fed can’t give in to political pressure to lower interest rates, which could hurt the country’s economic stability. Check out that story here.
For agriculture investors, Powell's testimony could suggest a stable economic environment with moderate inflation. The Federal Reserve's cautious approach to interest rate cuts implies that borrowing costs may remain steady, which can influence investment decisions in the agricultural sector.
