Recently, Jerome Powell, Chairman of the Federal Reserve (Fed), delivered the semi-annual report on the current economic conditions and monetary policy to Congress. He warned that a prolonged period of high interest rates could pose a threat to economic growth, potentially dampening economic activity and the job market.

Despite strong economic growth and labor market performance, the Gross Domestic Product (GDP) growth rate has slowed but remains in an expansionary state. While inflation pressures have eased somewhat, the Fed remains committed to keeping inflation controlled at the target level of 2%, noting that inflation is not the sole risk factor and that economic and job market performance are equally crucial.

Powell indicated that with inflation continuing to moderate, the Fed is more confident about the economic outlook, yet high unemployment remains a concern.

Currently, the federal funds rate is maintained in the range of 5.25% to 5.50%, reaching its highest level in 23 years. Market expectations suggest that the Fed may begin cutting rates in September, with a potential 0.25 percentage point reduction by the year-end. However, at the June meeting of the Federal Open Market Committee (FOMC), some members indicated the possibility of only one rate cut.

Powell emphasized the Fed's independence and highlighted recent data showing robust economic growth in the United States. During the upcoming presidential election season, congressional scrutiny of monetary policy may intensify, but Powell reiterated the Fed's apolitical stance, focusing on fulfilling its responsibilities. Some Democratic lawmakers are urging swift rate cuts to prevent further deterioration in the unemployment rate.

This congressional report underscores the Fed's policy challenges amidst current economic conditions and its cautious approach to monetary policy adjustments.