Prolonged high interest rates may hurt US economic growth: Fed Chair Powell

U.S. Federal Reserve Chair Jerome Powell expressed concern on Tuesday that maintaining high interest rates for an extended period could pose risks to economic growth.

Powell expressed cautious optimism about the U.S. economy during his congressional testimony on Thursday. Powell highlighted ongoing strength in the labor market and noted some easing in inflation pressures, which the Fed remains committed to bringing down to its 2% target.

However, he cautioned against overly restrictive monetary policy, warning that it could potentially weaken economic activity and employment if not adjusted appropriately.

Powell’s remarks come amid market expectations of upcoming rate cuts by the Fed, aimed at supporting economic growth. While recent inflation data has shown improvement, Powell emphasized the need for sustained progress toward the Fed’s inflation goal to build confidence in the economy’s trajectory.

The Fed’s stance remains pivotal as it navigates economic indicators like rising unemployment and mixed gross domestic product growth, with Powell underscoring that despite challenges, U.S. economic expansion continues at a solid pace driven by robust domestic demand, albeit with some sectors experiencing contraction.