Powell Testimony Shows Fed Focused on Dual Mandate

While the Fed has a dual mandate of price stability and maximum employment, in recent years they’ve been more focused on taming out-of-control inflation, given that the labor market has been strong. However, in his testimony to Congress last week, Powell acknowledged that “elevated inflation is not the only risk we face,” as the job market has “cooled considerably.”

What’s the bottom line? Powell also noted that economic growth has moderated after a strong expansion in the second half of last year. Cooling consumer inflation combined with signs that the economy and job market are slowing have led to growing calls for the Fed to begin cutting their benchmark Fed Funds Rate, with growing odds that a cut may occur at their meeting on September 17-18. The inflation and labor market reports released ahead of that meeting will play a pivotal role in this decision.