12/02/2025 16:28:51
Federal Reserve Chair Jerome Powell has told lawmakers the central bank is in no rush to cut interest rates, reaffirming the Fed’s cautious stance amid a strong economy. Testifying before the Senate Banking Committee on Tuesday as part of his semiannual monetary policy report, Powell faced questions ranging from the economy and tariffs to the sudden dismantling of the Consumer Financial Protection Bureau (CFPB) and the growing influence of Elon Musk’s associates in government.
Interest rates steady as economy remains strong
Powell reiterated that with inflation gradually easing and the job market holding firm, the Fed does not see an urgent need to adjust its monetary policy.
“With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” Powell said.
The Fed left its benchmark interest rate unchanged at its January meeting, keeping it at 4.25% to 4.50%. While investors still anticipate a rate cut later this year, market expectations have shifted towards a single reduction rather than a rapid easing of policy. Powell made clear that further cuts would depend on inflation declining further or a clear weakening of the job market.
Consumer watchdog at centre of debate
Much of the hearing focused on the fate of the CFPB, the agency created in the aftermath of the 2008 financial crisis to oversee consumer protection laws. Republicans argued that the agency operates with little oversight, while Democrats highlighted its record of returning more than $21 billion to consumers.
Senator Elizabeth Warren, a key architect of the agency, condemned the sudden takeover of the CFPB by the Office of Management and Budget (OMB), calling it an effort to eliminate oversight of banks and lenders.
“If Musk and his OMB director succeed in killing the CFPB, it’s like putting a sign on every checking account, every credit card, every mortgage application and every car loan, (saying) cops have been fired, let the scams begin,” Warren said.
The turmoil at the agency escalated over the weekend when OMB Director Russell Vought assumed control of the CFPB, leading to the closure of its Washington headquarters. Protests erupted outside the agency’s offices following the move.
Senator Mike Rounds pushed back against concerns over the CFPB’s future, saying that financial institutions remain subject to audits and oversight from other regulators.
Powell, when asked about the Fed’s role, clarified that while the central bank funds the CFPB, it has limited authority over its operations.
Trade policy and Musk’s influence under scrutiny
Powell also faced questions about tariffs and China’s trade practices but remained cautious in his response. While acknowledging that trade policies can influence inflation, he emphasised that the Fed does not take a position on tariff policy.
“The standard case for free trade logically still makes sense,” Powell said. “It’s not the Fed’s job to make or comment on tariff policy… Ours is to try to react to it in a thoughtful, sensible way.”
The hearing also touched on Musk’s growing involvement in government operations, including reports that his associates had sought access to sensitive financial systems. Senators questioned Powell about potential risks to bank safety and the integrity of the Fed’s payment systems, though Powell declined to comment on specific incidents.
Powell is set to testify before the House Financial Services Committee on Wednesday, where he is expected to face further questioning on monetary policy and the shifting landscape of financial regulation.