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For the Fed, progress on inflation is 'considerable', but calls for more positive data
Tuesday, July 9, 2024 - 15:45
Jerome Powell - Europa Press

Jerome Powell, president of the United States Federal Reserve, has indicated that regulators are close to reaching an agreement on the Basel III criteria.

The president of the United States Federal Reserve (Fed), Jerome Powell, stated this Tuesday before the Senate Banking Committee that the entity he heads has made "considerable progress" to return inflation to the 2% objective, but that "more positive data" will be needed to reinforce confidence before lowering interest rates.

"We had seven months of good inflation data at the end of last year, then we had a quarter, actually a month or so, where inflation went up, and now we've had one really good inflation reading and one pretty good inflation reading." We just need to register more to increase confidence," he explained.

According to Powell's keynote address, May data on the personal consumption expenditure (PCE) price index, the Fed's preferred statistic for monitoring inflation, has been encouraging and shows "modest" progress coming together to the "considerable" already registered.

As he has done on previous occasions, Powell has insisted that lowering rates too soon could jeopardize inflation control and that doing so too late could weigh "unduly" on GDP and employment.

On the other hand, Powell has indicated that economic activity has slowed, but that it is still growing at a "solid pace", while, although unemployment is growing, the labor market "remains strong" and unemployment is "low." "in historical comparison. Thus, he added that the United States economy shows a vigor that other advanced countries with independent central banks do not have.

Powell has alluded to the productivity differential between the US and Europe over the last 40 years, with an annual improvement of 1% in the Old Continent and 2% on the other side of the Atlantic. He has attributed this phenomenon to the "flexibility" of the American labor market and a financial sector made up not only of banks, but also of other types of financing sources focused on innovative projects.


The president of the Fed has also been questioned about the Basel III criteria for banking, and has assured that enough progress has been made in its configuration to be "very close" to reaching an agreement among the relevant actors on the content of the changes.

However, he has refused to give details since "nothing is agreed until everything is agreed" and a final decision has not yet been made. "In my opinion, like that of the members of the [Federal Open Market] Committee, we must present a revised proposal for comments to be made for some time," he said.

The Basel III rules, an international agreement that emerged as a result of the 2008 financial crisis to avoid future bank failures, would raise the capital requirements that financial institutions should allocate to anti-crisis 'buffers'. Those most critical of the initiative point out that this will reduce credit in circulation and negatively affect growth.



Europa Press