US labour market fully back in balance, inflation improving: Fed chair

The US labour market “appears to be fully back in balance," Federal Reserve (Fed) chair Jerome Powell told Congress recently, without wanting "to be sending any signals about the timing of any future actions" on interest rates.

The Fed has kept its policy rate in the 5.25-5.5 per cent range since July last year.

The domestic job market has cooled from its pandemic-era extremes and in many ways is back where it was before the health crisis, he said.

"We are well aware that we now face two-sided risks," and can no longer focus solely on inflation, Powell told the Senate Banking Committee.

Inflation had been improving in recent months and "more good data would strengthen" the case for looser monetary policy, he said.

"After a lack of progress toward our 2 per cent inflation objective in the early part of this year, the most recent monthly readings have shown modest further progress," Powell said.

The country’s consumer price index did not rise at all in May.

Powell called the 4.1-per cent unemployment rate ‘still low’, but also noted that "in light of the progress made both in lowering inflation and in cooling the labour market over the past two years, elevated inflation is not the only risk we face."

Leaving monetary policy too tight for too long, "could unduly weaken economic activity and employment," Powell added.

Powell's recent semi-annual appearance in the Senate was followed by a hearing in the House of Representatives yesterday.

The US labour market “appears to be fully back in balance," Federal Reserve chair Jerome Powell told Congress recently, without wanting "to be sending any signals about the timing of any future actions" on interest rates. Inflation had been improving in recent months and "more good data would strengthen" the case for looser monetary policy, he said.