Federal Reserve Chair Jerome Powell testified before the United States Congress on Tuesday, emphasizing the importance of banking regulation over monetary policy. This semi-annual testimony came at a time of significant changes, as President Trump announced the cancellation of the Consumer Financial Protection Bureau. Throughout his testimony, Powell maintained that trade policy does not fall under the Federal Reserve's responsibilities. He reassured Congress of the safety and stability of the U.S. banking system while refraining from commenting on the recent tension between the U.S. and the European Union.
Powell's focus on banking regulation highlighted a shift in priorities, as the testimony did not delve into monetary policy matters. The VIX volatility index remained stable, indicating that markets are not overly concerned about tariff risks at present. Meanwhile, Powell reiterated that the U.S. economy is continuing to grow robustly, supported by a strong labor market and easing inflation, which remains above the 2% target rate. Despite these positive indicators, Powell cautioned lawmakers against easing policy too quickly, warning that it could lead to another surge in inflation.
In terms of economic outlook, the Atlanta Fed's estimate for Q1 GDP stands at 2.9%, which may bolster investor confidence. However, U.S. stock markets showed slight declines on Tuesday, interpreted by some as a sign of mild disappointment over the absence of rate cuts. Additionally, the 10-year Treasury yield increased by 3 basis points, a change unlikely to cause significant concern at the White House.
Despite the positive economic trends, both gold and the dollar experienced declines on Tuesday evening. The price of gold fell by $4, though it remained above $2,900, while the dollar's drop further indicated reduced market concern regarding tariff risks. These fluctuations suggest that investors continue to keep a close eye on potential economic shifts.
Powell's testimony underscored his commitment to maintaining stability and safety within the U.S. banking system. By prioritizing banking regulation over monetary policy discussion, he aimed to reassure lawmakers and stakeholders of the Federal Reserve's dedication to safeguarding the nation's financial infrastructure amid ongoing global uncertainties.