U.S. GOVERNMENT PUBLISHING OFFICE

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THE FEDERAL RESERVE’S SEMI-ANNUAL 

MONETARY POLICY REPORT 

HEARING 

BEFORE THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED EIGHTEENTH CONGRESS 

FIRST SESSION 

JUNE 21, 2023 

Printed for the use of the Committee on Financial Services 

Serial No. 118–33 

( 
(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

PATRICK MCHENRY, North Carolina, Chairman 

FRANK D. LUCAS, Oklahoma 

PETE SESSIONS, Texas 

BILL POSEY, Florida 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

ROGER WILLIAMS, Texas 

FRENCH HILL, Arkansas, Vice Chairman 

TOM EMMER, Minnesota 

BARRY LOUDERMILK, Georgia 

ALEXANDER X. MOONEY, West Virginia 

WARREN DAVIDSON, Ohio 

JOHN ROSE, Tennessee 

BRYAN STEIL, Wisconsin 

WILLIAM TIMMONS, South Carolina 

RALPH NORMAN, South Carolina 

DAN MEUSER, Pennsylvania 

SCOTT FITZGERALD, Wisconsin 

ANDREW GARBARINO, New York 

YOUNG KIM, California 

BYRON DONALDS, Florida 

MIKE FLOOD, Nebraska 

MIKE LAWLER, New York 

ZACH NUNN, Iowa 

MONICA DE LA CRUZ, Texas 

ERIN HOUCHIN, Indiana 

ANDY OGLES, Tennessee 

MAXINE WATERS, California, Ranking 

Member 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DAVID SCOTT, Georgia 

STEPHEN F. LYNCH, Massachusetts 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

JIM A. HIMES, Connecticut 

BILL FOSTER, Illinois 

JOYCE BEATTY, Ohio 

JUAN VARGAS, California 

JOSH GOTTHEIMER, New Jersey 

VICENTE GONZALEZ, Texas 

SEAN CASTEN, Illinois 

AYANNA PRESSLEY, Massachusetts 

STEVEN HORSFORD, Nevada 

RASHIDA TLAIB, Michigan 

RITCHIE TORRES, New York 

SYLVIA GARCIA, Texas 

NIKEMA WILLIAMS, Georgia 

WILEY NICKEL, North Carolina 

BRITTANY PETTERSEN, Colorado 

MATT HOFFMANN, Staff Director 
(III) 

C O N T E N T S 

Page 

Hearing held on: 

June 21, 2023 .................................................................................................... 1 

Appendix: 

June 21, 2023 .................................................................................................... 57 

WITNESSES 

WEDNESDAY, JUNE 21, 2023 

Powell, Hon. Jerome H., Chairman, Board of Governors of the Federal Reserve System ......................................................................................................... 5 

APPENDIX 

Prepared statements: 

Powell, Hon. Jerome H. .................................................................................... 58 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Horsford, Hon. Steven: 

Las Vegas Sun editorial entitled, ‘‘Economy, infrastructure thrive when 

Dems have the reins,’’ dated June 16, 2023 ............................................... 63 

Powell, Hon. Jerome H.: 

Written responses to questions for the record from Representative Barr ... 66 

Written responses to questions for the record from Representative 

Donalds .......................................................................................................... 84 

Written responses to questions for the record from Representative Himes 88 

Written responses to questions for the record from Representative 

Luetkemeyer .................................................................................................. 90 

Written responses to questions for the record from Representative Mooney .................................................................................................................... 92 

Written responses to questions for the record from Representative Sherman ................................................................................................................ 95 

Written responses to questions for the record from Representative Roger 

Williams ......................................................................................................... 97 

(1) 

THE FEDERAL RESERVE’S SEMI-ANNUAL 

MONETARY POLICY REPORT 

Wednesday, June 21, 2023 

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The committee met, pursuant to notice, at 10:05 a.m., in room 

2128, Rayburn House Office Building, Hon. Patrick McHenry 

[chairman of the committee] presiding. 

Members present: Representatives McHenry, Lucas, Luetkemeyer, Huizenga, Wagner, Barr, Hill, Emmer, Loudermilk, Mooney, Davidson, Rose, Steil, Timmons, Meuser, Fitzgerald, Garbarino, 

Kim, Donalds, Flood, Lawler, Nunn, De La Cruz, Houchin, Ogles; 

Waters, Velazquez, Sherman, Lynch, Green, Cleaver, Himes, Foster, Beatty, Vargas, Gottheimer, Gonzalez, Casten, Horsford, Tlaib, 

Torres, Garcia, Nickel, and Pettersen. 

Chairman MCHENRY. The Financial Services Committee will 

come to order. 

Without objection, the Chair is authorized to declare a recess of 

the committee at any time. 

Today’s hearing is entitled, ‘‘The Federal Reserve’s Semi-Annual 

Monetary Policy Report.’’ Not the most inventive title, but traditional; we call it the Humphrey-Hawkins hearing. 

I will note at the outset that this hearing has a hard stop at 1:00 

p.m., which we will strictly observe. The Chair would further announce to committee members that the Chair’s intention is to, in 

the second week we return in July, have a markup, and that markup will include two important bills: the first is giving digital assets 

a market structure and Federal regulatory remit; and the second 

is on a Federal stablecoin regime. It is the intention of the Chair 

to have that as two pieces of our committee markup in the second 

week we return in July. 

I now recognize myself for 4 minutes to give an opening statement. 

Thank you, Chairman Powell, for joining us today. Inflation remains broad-based and persistent, two troubling trends the Fed expects will continue. As you said last week, the process of getting 

inflation back to 2 percent has a long way to go. So even though 

the Federal Open Market Committee (FOMC) did not recommend 

a rate increase at last week’s meeting, it is fair to say that the Fed 

will continue to make additional increases in the months ahead. 

We would like to hear your thinking on those matters. 

As the FOMC again pointed out last week, the labor market still 

appears tight, with Fed policymakers projecting a rise in the unem-
2 

ployment rate to a still-low 4.1 percent at the end of the year. Despite pressure from the left, the Federal Reserve must remain committed to eliminating this stealth tax on American workers and 

families, and I urge you to continue that resolve. 

A few weeks ago, Congress took the first step toward getting our 

fiscal house in order through the Fiscal Responsibility Act. Republicans will continue fighting for sensible spending reductions to 

combat inflation. This stands in stark contrast to the Democrats’ 

spending spree that poured nearly $2 trillion into a supply-constrained economy that was already flush with trillions of dollars in 

savings provided by earlier bipartisan COVID rescue efforts. 

And after keeping interest rates too low, for too long, the Fed 

was slow to address the problem. In a stunning about-face, the Fed 

then raised interest rates by 5 percentage points in a little over a 

year, the fastest spike in modern history. This approach introduced 

accelerated interest rate risk for which companies, workers, and 

families across the country were not prepared. 

The bank runs we saw earlier this year are an example of the 

consequences. Now, we are told these runs represent a systemic 

threat to the stability of our financial system. Add in the commercial real estate exposure facing financial institutions, and it becomes very easy to understand the mounting anxiety consumers 

and job creators share, and I share their anxiety as well. The rapid 

rise in interest rates, coupled with knock-on effects of the bank failures, have led to signs of a credit crunch across the economy. This 

would have a damaging impact on consumers and job creators 

alike. 

To top it off, Fed Vice Chair for Supervision, Michael Barr, is undergoing a so-called holistic review of capital requirements, and 

something interesting that he mentioned in the press yesterday is 

a new approach to stress tests that I can’t quite understand. If reports are accurate, he is pursuing a massive increase in capital 

standards for medium and large institutions. This would limit 

banks’ ability to lend money, exacerbating the looming credit 

crunch, and starving families and small businesses of the capital 

they need. Financial markets will also bear the strain as they will 

be forced to absorb nearly $1 trillion in new Treasuries. This has 

led many to believe the Fed may be called on to help, perhaps 

through its repo or other facilities. 

Clearly, our economy is in a precarious position, from inflation, 

to a potential credit crunch, to substantial balance sheet risks for 

financial institutions. There is a great deal of uncertainty on the 

horizon. Uncertainty from the Fed’s supervision and regulation is 

the last thing the well-capitalized banking system needs now. Following numerous supervisory failures and a new Vice Chair for Supervision in the Federal Reserve injecting politics into policy, it has 

become clear that Congress may need to again examine separating 

supervision and regulation out of the Fed and gaining greater oversight and control by Congress and the elected branches. 

With that, Chairman Powell, thank you for being here today. The 

Chair now recognizes the ranking member of the committee, the 

gentlewoman from California, Ms. Waters, for 4 minutes for an 

opening statement. 
3 

Ms. WATERS. Thank you, Chairman McHenry. Chairman Powell, 

welcome back. First, I would like to start by acknowledging that 

the Federal Reserve made the right decision to pause interest rate 

hikes. As you know, since last November, I have cautioned against 

any approach to monetary policy that ignores the Fed’s maximum 

employment mandate and results in a recession with millions of 

people losing their homes and jobs. While we have had strong job 

growth thus far, experts contend that this trend will not persist 

with more rate hikes, especially in light of new challenges. For example, the recent bank failures have resulted in the banking industry further restricting credit, making it even more important for 

the Fed to move with caution. 

The progress that we have made in reducing inflation is borne 

out in the latest Consumer Price Index (CPI) data. In fact, it has 

been 10 months since the passage of the Inflation Reduction Act, 

and inflation has successfully been cut in half. Every single Republican Member of Congress voted against the bill and chose to cozy 

up to the wealthy tax cheats instead of working with Democrats to 

bring down costs for middle-class families. 

However, the only way we will fully combat inflation is to address the primary driver of inflation: soaring housing costs. Congress must invest more in fair and affordable housing. Under President Biden, unemployment is also at a historic low and job growth 

is on the rise. So far, there has been 29 straight months of strong 

job growth. In fact, a record 13 million jobs have been created since 

President Biden took office. 

Democrats are working to build on this progress and grow the 

middle class so that everyone can share in this economic growth. 

Republicans, however, just can’t seem to get their house in order. 

On the heels of almost blowing up our economy by forcing a national default, they are now picking a fight over a teeny-tiny fee 

of less than 1 percent of total housing costs, ignoring the costs 

homebuyers are paying with 7 percent interest rates, appraisal 

fees, and title insurance. Instead, they are fighting about gas 

stoves. In fact, just a week ago, Republican disarray got so bad that 

it halted business on the House Floor for the first time in 20 years. 

Lastly, as we continue to monitor the banking system following 

the recent bank failures, the Fed must act to correct the supervisory and regulatory failures identified by our committee’s oversight. Committee Democrats recently introduced 11 bills, including 

3 of my own, to strengthen the safety and soundness of our banking system and hold executives accountable for their misdeeds. The 

Senate Banking Committee is holding a markup this morning on 

a bipartisan bill on bank executive accountability. So, I urge Chairman McHenry to join us in advancing sensible reforms to strengthen our nation’s banking system 

With that, I yield back. 

Chairman MCHENRY. The gentlelady yields back. I now recognize 

the gentleman from Kentucky, Mr. Barr, who is also the Chair of 

our Subcommittee on Financial Institutions and Monetary Policy, 

for 1 minute. 

Mr. BARR. We expect proposals from the Fed’s Vice Chair for Supervision that could increase capital for financial institutions as 

much as 20 percent. Our already well-capitalized banks withstood 
4 

the COVID shock and severe Fed stress tests as the economy is facing headwinds from the Fed’s own rapid rate hikes. Now is not the 

time to be engineering massive new regulatory changes or hindering regional banks, which have already been under stress. New, 

onerous, one-size-fits-all regulation by the Fed needs proper vetting 

and transparency. I would ask you today to commit to providing us 

with analysis done so far by the Fed on the Vice Chair’s new proposals. 

I also respectfully ask that Chairman Powell revisit Section 

1107(a)(1) of the Dodd-Frank Act to observe that the Vice Chair for 

Supervision is authorized only to develop recommendations for the 

Board and oversee supervision and regulation. The law does not 

give the Vice Chair special abilities to unilaterally write his own 

preferred regulations. It does not say that the Vice Chair should 

unilaterally write public-facing book reports on bank failures or results of climate scenario experiments. Consensus is—— 

Chairman MCHENRY. The gentleman’s time has expired. 

Mr. BARR. I yield back. 

Chairman MCHENRY. We will now recognize the ranking member 

of our Financial Institutions and Monetary Policy Subcommittee, 

Mr. Foster, for 1 minute. 

Mr. FOSTER. Thank you, Chairman McHenry, and thank you, Mr. 

Powell, for being here today. In the wake of what seemed to be 

endless novel problems and disruption, I believe the Fed and Congress have done a reasonable job given the cards that we have been 

dealt. And indeed, it looks like the widely-anticipated recession 

from the endgame of COVID disruptions, if it occurs at all, will 

continue to be more of a soft landing than a disaster for our economy. 

While there is certainly more work to be done, in the immediate 

term, we can reflect with satisfaction on the historically-low unemployment, and 11 straight months of slowing inflation since the 

passage of the Inflation Reduction Act. However, I recognize that 

the necessary monetary policies put forth to combat inflation have 

not been without stress, including on the fraction of our banks that 

chose to ignore the Fed’s clear forward guidance that interest rate 

hikes were in the pipeline. 

We on this committee remain committed to alleviating the financial stress on everyday Americans to pay rent and get food on the 

table. And I look forward to discussing how recent policies have 

performed and what else we should do going forward to ensure a 

strong economic rebound. Thank you, and I yield back. 

Chairman MCHENRY. Today, we welcome the testimony of the 

Honorable Jerome H. Powell, Chair of the Board of Governors of 

the Federal Reserve System. Chair Powell, we thank you for your 

time and for being here. We will recognize you for 5 minutes to 

give an oral presentation of your written testimony. And without 

objection, your written statement will be made a part of the record. 

Chairman Powell, you are now recognized. 
5 

STATEMENT OF THE HONORABLE JEROME H. POWELL, CHAIRMAN, BOARD OF GOVERNORS OF THE FEDERAL RESERVE 

SYSTEM 

Mr. POWELL. Thank you, Chairman McHenry, Ranking Member 

Waters, and other members of the committee. I appreciate the opportunity to present the Federal Reserve’s semi-annual Monetary 

Policy Report. 

Chairman MCHENRY. Chairman Powell, if you will pull the 

microphone closer. 

Mr. POWELL. Thanks. We at the Fed remain squarely focused on 

our dual mandate to promote maximum employment and stable 

prices for the American people. My colleagues and I understand the 

hardship that high inflation is causing, and we remain strongly 

committed to bringing inflation back down to our 2-percent goal. 

Price stability is the responsibility of the Federal Reserve, and 

without it, the economy does not work for anyone. In particular, 

without price stability, we will not achieve a sustained period of 

strong labor market conditions that benefit all. 

I will review the current economic situation before turning to 

monetary policy. 

The U.S. economy slowed significantly last year, and recent indicators suggest that economic activity has continued to expand at a 

modest pace. Although growth in consumer spending has picked up 

this year, activity in the housing sector remains weak, largely reflecting higher mortgage rates. Higher interest rates and slower 

output growth also appear to be weighing on business fixed investment. 

The labor market remains very tight. Over the first 5 months of 

the year, job gains averaged a robust 314,000 jobs per month. The 

unemployment rate moved up, but remained low in May at 3.7 percent. There are some signs that supply and demand in the labor 

market are coming into better balance. The labor force participation rate has moved up in recent months, particularly for individuals aged 25 to 54. Nominal wage growth has shown some signs 

of easing, and job vacancies have declined so far this year. While 

the jobs-to-workers gap has narrowed, labor demand still substantially exceeds the supply of available workers. 

Inflation remains well above our longer-run goal of 2 percent. 

Over the 12 months ending in April, total personal consumption expenditures (PCE) prices rose 4.4 percent. Excluding the volatile 

food and energy categories, core PCE prices rose 4.7 percent. In 

May, the 12-month change in the CPI came in at 4.0 percent and 

the change in the core CPI was 5.3 percent. 

Inflation has moderated somewhat since the middle of last year. 

Nonetheless, inflation pressures continue to run high, and the process of getting inflation back down to 2 percent has a long way to 

go. Despite elevated inflation, longer-term inflation expectations 

appear to remain well-anchored, as reflected in a broad range of 

surveys of households, businesses, and forecasters, as well as measures from financial markets. 

With inflation running well above our longer-run goal of 2 percent, and with labor market conditions remaining tight, the FOMC 

has significantly tightened the stance of monetary policy. We have 

raised our policy interest rate by 5 percentage points since early 
6 

last year, and we have continued to reduce our securities holdings 

at a brisk pace. We have been seeing the effects of our policy tightening on demand in the most-interest-rate-sensitive sectors of the 

economy. It will take time, however, for the full effects of monetary 

restraint to be realized, especially on inflation. 

The economy is facing headwinds from tighter credit conditions 

for households and businesses, which are likely to weigh on economic activity, hiring, and inflation, and the extent of these effects 

remains uncertain. In light of how far we have come in tightening 

policy, the uncertain lags with which monetary policy affects the 

economy, and potential headwinds from credit tightening, the 

FOMC decided last week to maintain the target range for the Federal funds rate at 5- to 5.25 percent, and to continue the process 

of significantly reducing our securities holdings. 

Nearly all FOMC participants expect that it will be appropriate 

to raise interest rates somewhat further by the end of the year. But 

at last week’s meeting, considering how far and how fast we have 

moved, we judged it prudent to hold the target range steady to 

allow the Committee to assess additional information and its implications for monetary policy. In determining the extent of additional 

policy firming that may be appropriate to return inflation to 2 percent over time, we will take into account the cumulative tightening 

of monetary policy, the lags with which monetary policy affects economic activity, and inflation, economic, and financial developments. 

We will continue to make our decisions meeting by meeting 

based on the totality of incoming data and their implications for 

the outlook for economic activity and inflation, as well as the balance of risks. We remain committed to bringing inflation back 

down to our 2-percent goal and to keeping longer-term inflation expectations well-anchored. Reducing inflation is likely to require a 

period of below-trend growth and some softening in labor market 

conditions. Restoring price stability, again, is essential to set the 

stage for achieving maximum employment and stable prices over 

the longer run. 

Before concluding, let me briefly address the condition of the 

banking sector. The U.S. banking system is sound and resilient, as 

detailed in the box on financial stability in our Monetary Policy Report. The Fed, together with the Treasury and the FDIC, took decisive action in March to protect the U.S. economy and to strengthen 

public confidence in our banking system. The recent bank failures, 

including that of Silicon Valley Bank, and the resulting bank stress 

have highlighted the importance of ensuring that we have the appropriate rules and supervisory practices for banks of this size. We 

are committed to addressing these vulnerabilities to make for a 

stronger and more-resilient banking system. 

We understand that our actions affect communities, families, and 

businesses across the country. Everything we do is in service to our 

public mission. We at the Fed will do everything we can to achieve 

our maximum employment and price stability goals. Thank you. 

[The prepared statement of Chairman Powell can be found on 

page 58 of the appendix.] 

Chairman MCHENRY. Thank you, Chairman Powell. I now recognize myself for 5 minutes. 
7 

Chairman Powell, as I laid out in my opening statement, inflation continues to be broad-based and persistent, both of which are 

concerning. Last week, the Federal Open Market Committee 

(FOMC) decided to pause rate increases, and at the same time, the 

Committee alluded that it would raise rates more later in the year. 

So, how should the FOMC’s posture at the June meeting be interpreted? Will the Committee continue to raise rates later this year? 

Mr. POWELL. Thank you, Mr. Chairman. You are right. Of 

course, we did decide to maintain the Federal funds rate at its current rate at this meeting. At the same time, participants submitted 

personal forecasts. Almost all of them thought there will be additional hikes, and I just want to say those two things are entirely 

consistent, the point being that the level to which we raise rates 

is actually a separate question from the speed with which we move. 

Earlier in the process, speed was very important. It is not very important now. The sense of the summary of economic projections and 

the decision really is just that, given how far we have come, it may 

make sense to move rates higher, but to do so at a more moderate 

pace. That is really it. 

We were at 75 basis points for several meetings, then we were 

at 50 basis points, then 25 basis points at 3 consecutive meetings, 

and now we are monitoring that pace as much as you might do if 

you were to be driving at 75 miles an hour on the highway, then 

50 miles an hour on a local highway, and then as you get closer 

to your destination, as you try to find that destination, you slow 

down even further. 

Chairman MCHENRY. Okay. So, more data is necessary for the 

Fed to make these decisions, and that is one interpretation, but 

thank you for a broader view there. 

I also want a broader view on this question. The Vice Chair for 

Supervision is performing his own personal holistic review of the 

Fed’s regulatory framework for bank capital and liquidity. In an 

interview yesterday, he discussed some version of a new type of 

stress test, even striking complete confusion in his description of it. 

And at the same time, we have testimony from you, and even 

from the Vice Chair for Supervision, saying that we have a sound 

banking system that is well-capitalized. You will sit in judgment of 

this proposal that the Vice Chair for Supervision will bring to the 

full Board on this holistic review of capital. There are a lot of discussions about the amounts of capital he is talking about. The concern that this is pro-cyclical at a time where our economy with 

higher rates is you are measuring what is happening in the broader economy. And at the same time, we are going to have a major 

piece of capital required by financial institutions, which will further restrict lending. So, how can you tell us to think about that, 

given your seat on the Federal Open Market Committee and your 

position as a Fed Governor? How would you interpret that? 

Mr. POWELL. I guess I would say that you are right. There are 

a significant number of proposals that are kind of in the works. 

They haven’t been finalized, let alone brought to the Board yet, so 

I can’t really get into specific details today. 

Chairman MCHENRY. But we would like your thinking, Chairman Powell. That is what we would like. 
8 

Mr. POWELL. What I can share is principles and how I will think 

about this. Regulatory proposals go to the Board. Every person on 

the Board—that is six Governors now—has an obligation to evaluate and vote on those, and I am one of those people. I also chair 

the Board. 

There are a couple of things I would point out. First, I think regulation should be transparent, consistent, and not too volatile, particularly as it relates to capital requirements. I do note the central 

importance of capital. We want banks to be resilient to shocks. We 

want them to be able to lend in both good and bad times. We want, 

in particular, the global systemically important banks (G-SIBs), 

which are the 8 largest banks, to have very high levels of capital 

and liquidity. Indeed, we have spent years raising those levels over 

a long period of time. And I think there is broad agreement, as you 

point out, that capital is strong, and the question there will be 

what sorts of increases will be justified? That is what we will be 

looking at. 

The other thing to point out is the tradeoff between higher capital—the benefit of it, of course, is to have stronger banks that can 

lend and maybe survive more kinds of crisis environments, but 

there are costs as well there. And I think it is going to be, as always, a question of weighing and balancing those costs, and that 

is what I will be thinking about. The last thing I will say about 

that is just we benefit from having banks of all different shapes 

and sizes in our system, and we want to be careful not to regulate 

the smaller banks to the point where their business models are 

challenged for all but the largest banks. 

Chairman MCHENRY. This committee would expect to see a 

quantitative analysis of whatever the capital charge is going to be. 

We expect that from the Fed, as we do from other regulators. 

With that, we will now recognize the ranking member of the 

committee, Ms. Waters, for 5 minutes. 

Ms. WATERS. Thank you very much. Chair Powell, at this committee’s last hearing on digital assets, my Republican colleagues 

proposed a stablecoin bill that would create 58 different licenses, 

with Federal regulatory approval over only 2 of the licenses. The 

remaining 56 licenses could be issued by each State, Territory, and 

Washington, D.C., with little or no Federal oversight, regulation, 

and enforcement. 

This proposal takes State preemption to a whole new level. It effectively allows every State to preempt another State. D.C.-based 

coins, for example, would be sold to individuals nationwide, and 

New York or North Carolina regulators could do nothing to protect 

their own residents, while even the Fed would be severely hamstrung in providing any oversight. I have argued that we should 

allow States to be part of this process, but we must have a strong, 

enforceable Federal floor with a role for the Federal Reserve to approve and provide oversight of payment stablecoins issued by 

nonbanks in order to ensure that consumers are protected. Such a 

framework is similar to our dual banking system, and it would ensure that nonbanks and banks are treated the same. 

We should also bear in mind that payment stablecoins are a new 

form of currency intended to allow individuals to pay for things 

with them. As such, do you agree that it is important for the Fed, 
9 

as our central bank, to have a chance to approve or decline any 

State-licensed non-bank entity before it starts issuing payment 

stablecoins nationwide? 

Mr. POWELL. First of all, let me say we appreciate that we have 

been able to offer our views on these things to your staff and also 

the Majority staff, and we appreciate the consideration that is 

given to our views. We do see payment stablecoins as a form of 

money, and in all advanced economies, the ultimate source of credibility in money is the central bank. And we believe that it would 

be appropriate to have quite a robust Federal role in what happens 

with stablecoins going forward, and that leaving us with a weak 

role, and allowing a lot of private money creation at the State level, 

would be a mistake. But nonetheless, again, I do appreciate that 

we have been able to be heard and share our views with the committee. 

Ms. WATERS. Thank you so very much. I am appreciative for that 

clear answer. The next question I have for you is a bit unusual, but 

one of the reasons we push diversity is because issues of people of 

color, et cetera, have not been dealt with. I am going to throw you 

something that you would not expect. 

Earlier this week, our nation celebrated Juneteenth, which Congress recognized as a national holiday for the first time in 2021. 

This holiday celebrates the day enslaved African Americans in 

Texas heard that they were free, 21⁄2 years after the Emancipation 

Proclamation was issued. To this day, Black Americans grapple 

with enduring racial and economic inequality that has its roots in 

slavery, as evidenced by the Black-White gap in net worth and 

homeownership rates. My bill, the Federal Reserve Racial and Economic Equity Act, would require the Federal Reserve to carry out 

its duties in a manner that supports the elimination of racial and 

ethnic disparities in employment, income, wealth, and access to affordable credit. 

Now, the Fed has a number of duties: to pursue maximum employment in monetary policy; to supervise banks for compliance 

with our fair lending laws; and to ensure that the Community Reinvestment Act is administered in a way that puts an end to discriminatory redlining practices by banks. Do you agree with me 

and Atlanta Federal Reserve Bank President, Raphael Bostic, 

among others, that the Fed has a role to play in addressing racial 

and economic inequality as it carries out its work until Congress 

passes this bill? What steps can you take to address racial and economic inequality? 

Mr. POWELL. We do consider inequality in the economy as part 

of our thinking about decisions, and those are certainly highly-valuable social goals to pursue. I would say our ability to take part 

in addressing those issues is fairly limited. We have one Federal 

interest rate that we set. We do try to keep in mind, as you know, 

not just the aggregate national level of unemployment or employment, but also that for different ethnic groups, so we take that into 

account. And I think that is just part of making sure that we feel 

like we have all Americans in the room with us when we are making decisions on monetary policy. I will say, though, I think other 

agencies are better suited to address these deep issues. 
10 

Ms. WATERS. Thank you. We must have this continued discussion 

on racial equality. I yield back. 

Chairman MCHENRY. The gentlelady yields back. We will now go 

to the Vice Chair of the committee, Mr. Hill of Arkansas, for 5 minutes. 

Mr. HILL. I thank the chairman of the committee, and, Chairman 

Powell, it’s great to have you back before the committee. This 

morning, you have reiterated, and certainly Vice Chair Barr has reiterated a number of times that the banking industry here in the 

United States is well-capitalized. And, in fact, capital levels have 

remained robust despite COVID-19, with a 20-plus percent unemployment rate increase, and a 9-percent output gap. They have remained stable through government shutdowns. They have remained stable through severe stress testing. And maybe more importantly, just in the last few months, since the first week of 

March, you have seen strong capital come into play as we have 

grappled with the reality of a 40-year increase in short-term interest rates and that impact on banks. 

But as Chairman McHenry said, Vice Chair Michael Barr continues to say he wants to increase capital requirements on certain 

financial institutions. And in March, you testified that, ‘‘I will do 

everything I can possibly do to bring people together—meaning on 

the Board of Governors—in consensus, and have a capital framework that could be broadly supported.’’ To what extent have you 

and the other Governors been involved in this so-called holistic review by Vice Chair Barr? Has he briefed the other members of the 

Board of Governors thus far? 

Mr. POWELL. Yes, and we have all been briefed by staff on the 

proposals, but as I mentioned, they are still somewhat in motion, 

but, yes, we have been briefed. 

Mr. HILL. So, you would say those proposals are still under consideration and that there is no final decision that has been made 

by the Board? 

Mr. POWELL. Well, no. Once the proposals really do settle down 

and are written up, they will come to the Board for a full discussion and a vote. 

Mr. HILL. Has the Fed Board reconstituted the Committee on Supervision and Regulation, the membership of it? 

Mr. POWELL. Yes. Oh, absolutely. 

Mr. HILL. And who is on that Committee now? 

Mr. POWELL. That Committee is chaired by Vice Chair Barr, and 

it also includes Governor Jefferson, and it includes Governor Bowman. 

Mr. HILL. When you look at capital in the U.S. and look at the 

global systemically important banks (G-SIBs) here versus other 

places in the world, would you say that the U.S. banks, the U.S. 

G-SIBs are better capitalized than their global peers in Europe or 

in Asia? 

Mr. POWELL. We are certainly at or near the top-of-the-league 

table. I think there are a couple of other jurisdictions that also 

have broadly similar levels of capital strength, but, yes, we are at 

the top-of-the-league table. 

Mr. HILL. I looked at it this morning, and the U.S. G-SIBs have 

11.3 percent capital without any kind of modification compared to 
11 

their European competitors at only 9.9 percent. Would you say that 

we are better capitalized than the European banks, the European 

G-SIBs? 

Mr. POWELL. I hate to call out the other jurisdictions, but I 

would say our banks are very strongly capitalized and also competing quite successfully globally outside the United States. 

Mr. HILL. Yes, I agree. And I think we have strengthened capital 

and we have strengthened our supervision, notwithstanding the 

problems that we saw this spring, which we have talked about ad 

nauseam here, but I think that capital standard does make American banks stand out. And as for the so-called Basel III holistic reforms, wouldn’t it be better if the European banks did a holistic review and actually got their capital up to American standards? 

Mr. POWELL. I think they are bound by the same—nobody is 

bound by these, but they have agreed to follow the same standards, 

and I think they are going through the same process we are going 

through. 

Mr. HILL. Same topic. The FDIC supervisory process and the 

OCC supervisors, are they involved and engaged with Vice Chair 

Barr in looking at this, ‘‘holistic,’’ review of capital adequacy? In 

other words, are they providing their input to the Vice Chair for 

Supervision and their own views on this topic? 

Mr. POWELL. On the regulatory proposals that are relevant to 

them, yes. I think on the capital proposals, yes, I believe so. 

Mr. HILL. And you made a comment a minute ago, I think to 

Chairman McHenry’s question, that you would like to see rules and 

supervisory rules consistent over time, and I think that is frustrating. Here, we see change in Administrations. Sometimes, we 

see change in rules, which is, I think, frustrating to the private sector and to market participants. I note that the Biden Administration says that the Financial Stability Oversight Council (FSOC) 

should now base their decisions on size as opposed to activities, 

and for several years now, we have had an activities designation 

and a cost-benefit analysis. Do you think the activities designation 

gives supervisors more discretion at FSOC to select who should be 

deemed under their supervision? 

Mr. POWELL. I actually think that one—— 

Mr. HILL. In other words, should we be looking only at size, or 

should we look at cost-benefit analysis and activities? My time has 

expired, so if you would answer that in writing, I would appreciate 

it. I think this is an important issue. 

Mr. POWELL. Okay. 

Mr. HILL. I yield back, Mr. Chairman. 

Chairman MCHENRY. We will now go to Ms. Velazquez of New 

York for 5 minutes. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. Chair Powell, at 

your press conference last week, you stated, ‘‘The Committee is 

completely unified in the need to get inflation down to 2 percent, 

and we will do whatever it takes to get it down to 2 percent over 

time.’’ Some analysts have interpreted this statement as the 

FOMC’s willingness to trigger a recession in order to get inflation 

to 2 percent. How would you respond? Is this is a fair and accurate 

interpretation? 
12 

Mr. POWELL. Our statutory goals are price stability and maximum employment, and we are dedicated to using our tools to 

achieve those goals. In the case of employment, we still have historically-low unemployment rates and high employment rates now, 

a high participation, and a very strong labor market. We are very 

far from our inflation target of 2 percent, and we are very focused 

on getting back to 2 percent. 

Ms. VELAZQUEZ. And how does the FOMC take into consideration 

the impact of rising interest rates on low- and moderate-income 

(LMI) communities and small businesses when determining monetary policies? 

Mr. POWELL. We only have one main interest rate to raise or 

lower, and it applies to everyone. But I would say that inflation 

hits LMI communities and people generally at the lower end of the 

income spectrum much harder than people in the middle or at the 

high end because high inflation can get you into trouble right away 

if you are living on a fixed income, just to cover the basic necessities. So, it is for the benefit of those people that we must get inflation under control. It is for the benefit of all Americans, but particularly for those people, and we keep that in mind as we are 

strongly committed to getting inflation back down to 2 percent over 

time. 

Ms. VELAZQUEZ. And they are the same people who are having 

a hard time accessing loans, and it’s the same with small businesses. Chair Powell, Vice Chair Barr’s report on the Fed’s review 

of Silicon Valley Bank states that while there was regulatory tailoring conducted in response to S. 2155, there was also—and this 

is the part that really concerns me—a cultural shift at the Fed 

under the direction of the previous Vice Chair for Supervision, 

Randy Quarles. According to the report, this shift included pressure to reduce burdens on firms, meet a higher burden of proof for 

a supervisory conclusion, and a need to accumulate more evidence 

than in the past. As Chair during that period, were you aware of 

this cultural shift and the impact it was creating? 

Mr. POWELL. I think we learned from the Silicon Valley failure 

and the others that there is going to be a need for stronger supervision and also regulation for banks of that size, and I am committed to learning the right lessons from this exercise and to forthrightly implementing changes. 

Ms. VELAZQUEZ. But were you aware of the cultural shift? 

Mr. POWELL. I can’t really characterize it that way. Certainly, I 

was aware that we were trying to avoid excessive regulatory burden. That is always inappropriate—— 

Ms. VELAZQUEZ. Do you disagree with Vice Chair Barr’s report 

in that respect? 

Mr. POWELL. I am sure that the people who wrote the report 

were accurately reporting what they heard from back in the—— 

Ms. VELAZQUEZ. How often were you meeting with Vice Chair 

Quarles? 

Mr. POWELL. Reasonably frequently. We sat quite near each 

other. 

Ms. VELAZQUEZ. And never discussed a cultural shift? 

Mr. POWELL. I didn’t say that. The way you are describing it is 

not what I recall. I recall Vice Chair Quarles talking about things 
13 

like focusing on the really important issues and not getting diverted into other—— 

Ms. VELAZQUEZ. So, the way it was described by Vice Chair Barr 

is not what you recall? 

Mr. POWELL. I had no part in—— 

Ms. VELAZQUEZ. What steps—— 

Mr. POWELL. I said I had no part in preparing the report. I am 

confident that the staff who worked on the report reported accurately what they heard. I am sure that is right. 

Ms. VELAZQUEZ. What steps did you take proactively to meet 

with regulatory and supervisory staff? 

Mr. POWELL. I think we are taking significant steps now. As you 

know, under Vice Chair Barr’s leadership, we are looking carefully 

at these events and asking ourselves what we need to do with supervision. I think there is a point to be made that there are situations in which we need to be more forceful and more proactive, not 

in all situations, but in some. In regulation, I think we are learning 

that we need to update our thinking around liquidity regulation, 

which was based on a certain speed of bank runs, which now looks 

to be outdated. 

Ms. VELAZQUEZ. My time has expired. 

Chairman MCHENRY. The gentlelady’s time has expired. We will 

now recognize the gentleman from New York, Mr. Garbarino, for 

5 minutes. 

Mr. GARBARINO. Thank you, Mr. Chairman. Chairman Powell, 

thank you for being here. I just want to start off by asking a few 

yes-or-no questions. Was the Silicon Valley Bank failure a result of 

a liquidity issue? 

Mr. POWELL. I’m sorry? 

Mr. GARBARINO. Was the Silicon Valley Bank failure the result 

of a liquidity issue? 

Mr. POWELL. Among other things, yes. 

Mr. GARBARINO. Was the Signature Bank failure the result of a 

liquidity issue? 

Mr. POWELL. Yes. There were also a lot of very bad management 

decisions being made there. 

Mr. GARBARINO. Was the First Republic Bank failure the result 

of a liquidity issue also? 

Mr. POWELL. Among other things, yes. I wouldn’t say just liquidity. 

Mr. GARBARINO. Okay. Were any of them a failure of having toolow capital levels? 

Mr. POWELL. Let’s go to Silicon Valley Bank. The issue that triggered the run initially was the presence of significant losses in 

their securities portfolio. 

Mr. GARBARINO. Yes. 

Mr. POWELL. And that is a capital issue. 

Mr. GARBARINO. So, they had too-low capital. 

Mr. POWELL. As you know, they weren’t required to take that 

into account in their capital. If you remember, what people were 

focusing on was these portfolio losses, and then what people 

weren’t focusing on was the fact that they had in excess of 90-percent uninsured deposits, and that is what caused the run. 
14 

Mr. GARBARINO. Would increasing capital requirements for Silicon Valley Bank or any of these other banks have stopped these 

banks from failing? 

Mr. POWELL. That is a hypothetical, unknowable question. I 

think it might have helped, but—— 

Mr. GARBARINO. Increasing it by how much would have helped? 

Mr. POWELL. It is very hard to say. Clearly, the main issue there 

was a failure of management to follow up, a failure of supervision 

to require them to follow up, and really, the liquidity regulation 

was not appropriate. We needed to have stronger regulation around 

liquidity and uninsured deposits. 

Mr. GARBARINO. Last year, you said the banking system is very 

strong, well-capitalized, and highly liquid, and it does a much better job of understanding the risks that it runs and managing them, 

and just today, you said the banking sector seems to be strong. Do 

you still stand by those things? I mean, you just said it today. 

Mr. POWELL. Yes. 

Mr. GARBARINO. Yes. And last month, Vice Chair Barr appeared 

before this committee, and he agreed with you and said, overall, 

banks have strong capital and liquidity. Treasury Secretary Yellen 

has said similar things. Even though you have all said that banks 

need to have strong capital, you seem to leave us today by saying 

the bank is considering what increase would be appropriate of capital requirement. Has the Board already decided that an increase 

will happen, and they are just deciding what the size is of the increase for capital requirements? 

Mr. POWELL. No. What I thought I said was that any increase 

above these levels would need to be shown to be justified. 

Mr. GARBARINO. Do you personally think that an increase is necessary at this time? 

Mr. POWELL. Do I think—— 

Mr. GARBARINO. That an increase in capital requirements is necessary at this time. 

Mr. POWELL. Look, I am going to react to whatever the proposal 

turns out to be in the end and give it my best assessment. That 

is what I will say. 

Mr. GARBARINO. Okay. You just also say that credit is tightening. 

Won’t increasing capital requirements further tighten credit? 

Mr. POWELL. The thing about capital requirements is if we put 

a proposal out this summer, let’s say, it will be quite a while before 

that proposal is agreed to among the agencies and voted on, and 

then it will take some years to come into full effect. Whereas interest rates, for example, have immediate effects on financial conditions and reasonably quick effects on economic activity, capital requirements are a much more sort of medium-term, longer-term 

thing. 

Mr. GARBARINO. I would like to move on to what impacts raising 

capital requirements would have. According to academic literature 

by the Basel Committee on Banking Supervision, a 1-percent-point 

increase in capital requirements could potentially reduce annual 

GDP by up to 16 basis points, showing that higher capital requirements come at a cost and could have a significant impact on the 

U.S. economy. I discussed this with Vice Chair Barr last month 
15 

and expressed my concerns about the impact of increased capital 

on the real economy, but he didn’t answer the question directly. 

We are hearing from all sorts of industries that these increased 

capital requirements at any level would have a further tightening 

on lending, and I am hearing that from everybody. If that happens, 

it is going to be a real disaster. So, I think for anything that the 

committee proposes, if you could come back and brief us on before 

it is finalized, we would appreciate that very much, sir. 

Chairman MCHENRY. The gentleman’s time has expired. The 

gentleman from Missouri, Mr. Cleaver, is now recognized. 

Mr. CLEAVER. Thank you, Mr. Chairman. And welcome, Chairman Powell. Thank you very much. This is probably Economics 

101, but a lot of people in my district are misunderstanding Economics 101, along with me. 

In May of this year, unemployment remained at 4 percent for the 

16th consecutive month, and at 3.7 percent. This means that unemployment remained at or below 4 percent for the longest stretch in 

50 years. In the U.S., the job openings rate has fallen by more than 

1.5 percentage points from its peak while the unemployment rate 

has crept slightly lower. In other words, job openings declined but 

so did joblessness, and I am wondering if there was any expectation that this would occur? 

Mr. POWELL. The ratio of job openings to unemployed people has 

been in historic territory, all-time highs for a while now in the last 

year or so, and there is an expectation that it will come down. A 

while ago, there were two jobs for every unemployed person. Now, 

we are down to 1.7, I believe, or 1.6, and that still speaks to a historically-tight labor market where the demand for labor still very 

substantially exceeds the supply of available workers. And by the 

way, that is a way that the labor market can become less tight 

without having unemployment go up. 

Mr. CLEAVER. I am sure you are hearing this all over, as I am. 

I have a good friend who has a number of barbecue restaurants in 

Kansas City, and he is constantly telling me how difficult it is to 

find workers, to the point where he did something that he would 

never do: He put a sign out in front of his restaurants of job openings. Are there particular industries or sectors of the economy 

where we would expect this sentiment to be particularly true? 

Mr. POWELL. No, and that is right. There is still a significant 

labor shortage. The surveys at the aggregate level show that it is 

not as bad as it was 2 years ago. And gradually, businesses are reporting that they are better able to find workers. And workers are 

reporting that they are not quitting their jobs as much as they 

were. A really good sign of how tight a labor market is, is how 

much people feel free to quit their jobs voluntarily. So, those things 

are all suggesting a gradual cooling and gradually getting supply 

and demand back into alignment, but we are not there yet. We still 

have a significant excess of demand over supply. 

Mr. CLEAVER. Are we also finding that—I know in Missouri, in 

spite of the fact that there is some jelly-like movement with the 

economy, people are still willing to go out and buy homes. We are 

not having difficulty in terms of people going out and getting loans, 

even with the interest rates rising. If the consumers are constantly 
16 

paying whatever the interest rates might be, are we going to get 

stuck just continually going up? 

Mr. POWELL. No, I don’t think so. The housing sector nationally 

has flattened out and maybe ticked up a little bit, but at a much 

lower level from where it was with rates as high as they are. Supply and demand are getting back into alignment. And I do think 

that housing inflation is set to come down as we move forward. 

There is a particular way that the inflation is calculated there so 

that you are waiting for leases to come due and roll over at much 

lower levels of increase. So, we think housing inflation will be coming down significantly over the course of the rest of this year and 

next year. 

Mr. CLEAVER. Thank you, Mr. Chairman. 

Chairman MCHENRY. The gentleman’s time has expired. The 

gentlewoman from California, Mrs. Kim, is recognized. 

Mrs. KIM. Thank you for recognizing me, Mr. Chairman, and 

Chairman Powell, thank you for joining us. I appreciate your comment to price stability and commend your efforts to reduce inflation 

and make life more affordable for all Americans. Thank you for 

that. 

The 10,000 Small Businesses survey of 2,000 small businesses 

found that 77 percent were concerned about their ability to access 

capital. With that in mind, do you think it is appropriate for the 

Federal Reserve to increase capital requirements at this time? And 

I know this was discussed earlier, but what specific analysis has 

the Fed conducted so we can determine the impact of this 

warrantless regulatory action on small businesses and other marginal borrowers? 

Mr. POWELL. With capital standards, it is always a tradeoff. 

More capital means a more stable, more sound, and more resilient 

banking system, but it also, at the margin, can mean a little bit 

less credit availability, and also, the price of credit can be affected, 

and there is no perfect way to assess that balance. Obviously, the 

answer is not zero capital and it is not 100 percent capital, so it 

is somewhere in the middle. 

Mrs. KIM. Yes. Thank you. There are estimates that about $1.5 

trillion of commercial real estate loans that are maturing in the 

next 3 years, and a decline in demand in the prevalence of workfrom-home policies are putting a strain on the commercial real estate market. The bulk of commercial real estate loans are held by 

smaller and regional banks. Is the Fed thinking about policies that 

could provide time for commercial real estate loans to be refinanced, and could an increase in capital requirements reduce liquidity in the commercial real estate loan market? 

Mr. POWELL. We are very focused on the commercial real estate 

situation. You are right, of course, that a good portion of the commercial real estate loans are held in smaller banks. And supervisors are very much engaged with those banks, and it is particularly banks that have a high concentration. That is what we look 

for among the smaller banks, and there are some of those. But 

there is a playbook for working your way out of these loans, and 

it is particularly in the office sector where working from home is 

still a pretty material factor in some areas, as you know. 
17 

Mrs. KIM. Thank you. The next question has to do with the 

Board’s processes and procedures. What are those procedures that 

govern consideration and potential adoption of matters like the proposals that Vice Chair Barr is about to present to the Board? 

Mr. POWELL. On regulation as opposed to supervision, on regulation, the Board of Governors votes on regulatory proposals, and it 

is a majority vote. We now have six voters. So, when there is a proposal, it will be briefed carefully, then we will have a meeting, or 

it can actually be done virtually, and it probably will be done that 

way, as most of our meetings are, and then we have a vote. On supervision, it is different. Most supervisory matters are really under 

the authority of the Vice Chair for Supervision under the law, so 

most of them don’t have to go to the Board for a vote. 

Mrs. KIM. What percentage of the Governors must vote in favor? 

Mr. POWELL. A majority. 

Mrs. KIM. The majority of them? 

Mr. POWELL. Yes. 

Mrs. KIM. Okay. The California Governor, prior to the depositor 

bailout for Silicon Valley Bank (SVB), reportedly identified that he 

had been in touch with the highest levels of leadership at the 

White House and the Treasury. The Governor also, on Sunday, 

March 12th, when the bailout was announced, issued his own 

statement praising that action. There have also been reports that 

the Governor and his wife, with respect to their business and perhaps other interests, may have had depositor interest in SVB. So 

when the Federal Reserve Board, the FDIC Board, and Secretary 

Yellen, in consultation with the President, recommended invoking 

the systemic risk exception for SVB, and then decided to provide 

blanket insurance even on uninsured balances, did the Fed or any 

others, to your knowledge, perform any conflict-of-interest due diligence? 

Mr. POWELL. No. We were in an emergency situation. On Monday morning, there was going to be and there was a run on banks 

that had high uninsured depositors. 

Mrs. KIM. Looking back, do you think there was any—— 

Mr. POWELL. We carried out our duties. 

Mrs. KIM. Yes. 

Mr. POWELL. I am pretty sure we did the right thing. 

Mrs. KIM. And you don’t think there was any conflict of interest, 

even looking back on that? 

Mr. POWELL. I have nothing. I have absolutely no knowledge on 

that. 

Mrs. KIM. Okay. Thank you. Thanks for being here. I yield back 

the balance of my time. 

Chairman MCHENRY. The gentlelady yields back. The gentleman 

from Texas, Mr. Gonzalez, is recognized. 

Mr. GONZALEZ. Thank you, Mr. Chairman, and Ranking Member 

Waters. And thank you, Chairman Powell, for being here with us 

this morning. 

The June Federal Open Market Committee report indicates inflation in the U.S. and abroad continues to ease but remains elevated. 

In response to the proposed interest rate increases up until June 

14th, the recommendation is to pause interest rate hikes for the 

first time this year. Research has shown that the effects of mone-
18 

tary policy decisions like raising interest rates can take, on average, 42 months to be realized fully in the United States, meaning 

we may not fully understand the effects of this first increase in 

rates of March 2022 until next fall. With that in mind, how have 

our recently-tightened monetary policies impacted the strength of 

the U.S. dollar and how it is valued globally? 

Mr. POWELL. Let me say that there is a lot of uncertainty around 

how long it takes monetary policy to affect real activity. There is 

no agreement on 42 months or any particular time, and I think 

most people would say shorter than that. Are you asking how it 

would affect the dollar? 

Mr. GONZALEZ. Yes. 

Mr. POWELL. First of all, the Treasury Department has responsibility for the level of the dollar and the stewardship of the dollar 

as a currency. We don’t actually comment on that. We don’t look 

at any particular level. To us, it is a financial condition. A stronger 

dollar means certain things and a weaker dollar means certain 

other things. 

Mr. GONZALEZ. It continues to be a concern here in this committee. Also, Chairman Powell, as you are aware, the Federal Reserve’s core mission is to keep employment up and inflation down. 

Although I understand the calls for climate-related financial risk 

management from my colleagues, we should be focusing on the economic state of our country. The credit of the U.S. dollar is at jeopardy. And as you know, we have had global pressure recently, and 

we need to be sending a clear message that the world can rely on 

the full faith and credit of the United States dollar. We should be 

focusing on mitigating the calls to reduce dependency of the U.S. 

dollar. Monetary policy changes implemented in the U.S. are likely 

to cause a ripple effect throughout the global economy. 

With that said, would you agree that monetary policies to directly address climate change should be made by Congress and not 

the Federal Reserve, and implementing monetary policies and supervisory tools to exclude energy leaders from capital and financial 

institutions would have a grave impact on local, State, Federal, and 

even global economies? 

Mr. POWELL. I strongly agree that we have quite a narrow role 

in climate change, and really, the important decisions about climate change need to be made by elected people, not by the Fed. 

Mr. GONZALEZ. Thank you, and I yield back. 

Chairman MCHENRY. The gentleman yields back. The gentleman 

from Florida, Mr. Donalds, is recognized. 

Mr. DONALDS. Thank you, Mr. Chairman. Chairman Powell, 

thank you for being here. I really appreciate you being here. 

I have to say, first of all, it was good to hear from the other side 

of the aisle that the Federal Reserve should not even be engaging 

and using its tools with respect to climate change, or climate mitigation, or whatever the case might be. You have a big enough job 

as it is, so adding anything like that to your job, I think, would be 

wholly detrimental to the American economy, so I, for one, am glad 

to hear that coming from the other side of the aisle. 

You have had a couple of questions already on capital, bank capital, et cetera. Look, some of the current views are that continuous 

raises of bank capital will increase costs to our economy anywhere 
19 

from $50- to $200 billion. What is your view of the current desire 

or mode of Vice Chair Barr to fully implement the Basel III capital 

standards? 

Mr. POWELL. I think that is the next thing. Vice Chair Quarles 

was working on that. It didn’t get completed for various reasons. 

I think that is an international capital standard that we should go 

ahead and complete. As to the right level of capital, that is a discussion we are about to have. 

Mr. DONALDS. At the Fed, are you kind of concerned about the 

fact that it now seems like the European regulators are starting to 

pull back from that, that they are starting to think about capital 

standards being too much for European banks and that they are 

starting to recede from what was, I assume, kind of a handshake 

agreement in years gone by? 

Mr. POWELL. I am not hearing that exactly. We will be watching 

that carefully, though. 

Mr. DONALDS. We have, in my view, aggressively gone through 

this process of increasing capital standards and capital requirements on Tier 1 capital for banks. In retrospect, do you think that 

has been a net positive to the overall banking environment, or do 

you believe it has been a negative to the overall banking environment? 

Mr. POWELL. I think it has been a net positive. And as I pointed 

out earlier, U.S. banks have competed very, very successfully 

through this period, despite what were pretty significant capital increases that we put in a few years back. So, it really has led to a 

very strong and also made it well through the pandemic period, I 

thought, and I think that was a pretty good test. So, even though 

the government did do a lot to support the economy, I still think 

that those capital hikes we made in the last cycle come through 

looking pretty good. 

Mr. DONALDS. Do you guys at the Fed—I say, ‘‘you guys,’’ because I know you are the Chairman, but there are other members 

as well—have a view of the concern about community banking in 

the United States or lack thereof of community banking? It has 

been shrinking quite significantly over the past 10 or 12 years. 

Mr. POWELL. Very much so. It is a focus for us. We understand 

the importance of community banks, that they provide a different 

service and a really important service to smaller businesses and 

communities. And community banks have been consolidating for 30 

years now, so it is really a secular trend as people have moved to 

bigger cities and things like that, but we don’t want to do anything 

to move that along. We think that the world is not a better place 

with fewer community banks, and we try to keep that in mind in 

all of the regulatory and supervisory things that we do. 

Mr. DONALDS. Do you think that Federal regulatory policy, apart 

from Congress, has led to a supercharging effect of diminished community banking in the United States? 

Mr. POWELL. It has probably been a factor, but I do think there 

have been important demographic factors as well, and also having 

interstate banking. Interstate banking only became legal quite recently, and that also has led to consolidation. You can look back, 

again, look back 30-plus years, and you will see a very steady decline, so I think there are demographic and other factors driving 
20 

it. But regulation can fall as a fixed cost, which means that institutions need to be bigger, and I think that is probably part of the 

story. 

Mr. DONALDS. I don’t disagree with your conclusion. I am just 

concerned about the trajectory. I think just having larger financial 

institutions, larger banks, overall, with a diminishing smaller community bank infrastructure is detrimental to lending to small businesses, mom-and-pop businesses. It also could be parochial. I started my career in community banking, so I saw heartfelt situations. 

Last question, since I’m running out of time, the SEC has proposed a rule that would, among other things, require banks to segregate client cash held in custody, pending, custody bank balance 

sheets, and by extension to the bank custody model. Are you guys 

at the Fed concerned about this proposed rule from the SEC? 

Mr. BARR. [presiding]. The gentleman’s time has expired. Chairman Powell can respond in writing. 

Mr. POWELL. I will respond in writing. 

Mr. DONALDS. Okay. Fair enough. 

Thank you, Mr. Chairman. 

Mr. BARR. The gentleman from New York, Mr. Torres, is now 

recognized. 

Mr. TORRES. Thank you, Mr. Chairman, and thank you, Chairman Powell. As you know, the U.S. has foreign adversaries, particularly the Chinese Communist Party (CCP) that seem intent on 

de-dollarization. How seriously should the threat of de-dollarization 

be taken, in your view? 

Mr. POWELL. The status of the dollar as the world’s reserve currency is a very important thing to us. I think the reason we have 

that status is largely due to our great democratic institutions, the 

rule of law, and the fact that we have, generally speaking, had 

strong levels of price stability. And I think that the dollar will remain the reserve currency as long as those things are in place. 

Mr. TORRES. I want to explore that answer, because commenters 

often speak of the dollar as the world’s reserve currency as the 

cause of America’s economic dominance. Do you think of it as the 

cause of America’s economic dominance or as a consequence of it? 

Mr. POWELL. To me, it is more of a consequence. And also, there 

tends to be an equilibrium where one currency becomes the accepted global standard, and that has been the dollar for some time, and 

I expect that it will continue to be for some time. 

Mr. TORRES. It is often said that the Fed has a dual mandate of 

maximum employment and price stability. Do you view these mandates as equally binding upon the Fed or does one supersede the 

other? 

Mr. POWELL. They are perfectly equal under the law. 

Mr. TORRES. And I am curious to know what it means in practice 

to have a 2-percent inflation target. The latest pause notwithstanding, does it mean the Federal Reserve will continue raising 

interest rates until the 2-percent target is reached, even if doing 

so comes at the expense of maximum employment as well as financial stability? 

Mr. POWELL. No, it doesn’t mean that. It does not. The way we 

think about it is, most of the time, the two goals are aligned in the 

sense that if you are achieving one, you are achieving the other, 
21 

and if you are a little bit off, the other one, they move in the same 

direction. Today’s situation is unusual in that we are overachieving 

in effect the maximum employment goal, but we are far from 

achieving the inflation goal. 

In our system, we have a constitutional document, and what it 

says is that when that is the case, you look at how far you are from 

the goal, and you look at the speed with which you would move 

back to the goal. And that would tell you today that we should 

focus heavily on inflation. But as it becomes closer, as the two 

things become more aligned, then then they go back into perfect 

equality under the law. 

Mr. TORRES. So, the Fed engages in a delicate balancing act between employment and inflation? 

Mr. POWELL. Yes. 

Mr. TORRES. To what extent do you factor in financial stability, 

safety, and soundness when raising interest rates? 

Mr. POWELL. You are right. We do have a financial stability mandate, but we try to—— 

Mr. TORRES. You have a financial stability mandate with respect 

to your role as a bank regulator when it comes to—— 

Mr. POWELL. Also, just generally, we are the lender of last resort. 

Central banks were originally created to support the financial system in times of stress and to make sure that you don’t get into 

times of stress. Sorry. What was your question before that? 

Mr. TORRES. To what extent do you factor in safety and soundness when setting interest rates? 

Mr. POWELL. Sorry. We really try hard to use our financial stability tools for financial stability purposes and our monetary policy 

tools for monetary purposes. The reality on the ground is much 

messier than that. They are very much entangled and one affects 

the other. So, the separation is not at all perfect, but we do think 

of these as separate things with separate tools. 

Mr. TORRES. Do you think that the Silicon Valley Bank failure 

revealed a deeper tension between the safety and soundness mandate of the Fed as a bank regulator and the mandate of the Fed 

as an administrator of monetary policy? 

Mr. POWELL. I would say no, and I will tell you why. Interest 

rate risk is one of the most basic banking risks, and we supervise 

for it. Overwhelmingly, U.S. banks did manage their interest rate 

risk. Silicon Valley Bank didn’t, and even though the supervisors 

were pointing that out to them, the bank didn’t take action quickly 

enough. I would have thought that you can say that it was interest 

rate hikes that caused portfolio losses, but it was management that 

failed to hedge against those losses and failed to hold appropriate 

liquidity. 

Mr. TORRES. In the pre-COVID world, we had the best of both 

worlds: low unemployment and low inflation for decades. Do you 

believe that we could return to that best of both worlds, or are high 

interest rates the new normal in the American economy? 

Mr. POWELL. We will return to 2-percent inflation and maximum 

employment. What will be the level of interest rates there? That 

is a really good question. 

Mr. TORRES. Do you suspect it is going to settle at a higher level 

than we have known historically? 
22 

Mr. POWELL. I think it is really hard to know. It is a great question. We talk about this a lot. The people who argue that rates will 

move back down just point to the fact that it was really global factors that drove rates down in the first place. Maybe the truth is 

somewhere in the middle. It is hard to know. 

Mr. BARR. The gentleman’s time has expired. The gentleman 

from Nebraska, Mr. Flood, is recognized. 

Mr. FLOOD. Thank you, Mr. Chairman. Chairman Powell, I 

would like to discuss the continued efforts to unwind years and 

years of quantitative easing and what it has done to our Federal 

Reserve balance sheet. If you take a look at the size of the Federal 

Reserve’s balance sheet since the 2008 financial crisis, we have 

seen an alarming increase from around $800 million to today’s $8.3 

trillion in assets. 

Back in 2018, you did start the work of winding down the bal- ance sheet. You managed to offload roughly $700 billion of assets 

between the beginning of your time as Federal Reserve Chair and 

August 2019. The problem was, shortly after your efforts began, we 

had another major economic shock, the COVID-19 pandemic, that 

caused the Fed to once again return to quantitative easing as a 

form of economic relief. Pretty soon, the Federal Reserve’s balance 

sheet had increased another $4 trillion in size. That is how we 

made it to the balance sheet level that we are at today. 

I understand you have started working to shed some of the Federal Reserve’s balance sheet, and I appreciate that work. That 

being said, the scale involved here, to me, is startling. My concern, 

Chairman Powell, is that efforts to shed assets from the Fed’s balance sheet have never been anywhere as quick as efforts to build 

it back up. Our economic cycle does go through recessions from 

time to time. It is not always boom, but some bust, too. If we continue a pattern of rapidly building up the Federal Reserve’s balance sheet in bad times and slowly shedding assets in good times, 

we are going to see the balance sheet grow significantly over time. 

Chairman Powell, is this a concern of yours? And to pair with 

that question, long term, how can we avoid an environment where 

any effort to unwind the Federal Reserve’s balance sheet is undone 

anytime there is an economic shock? 

Mr. POWELL. It is a concern. This time, the balance sheet rolloff is much, much faster than it was back in the first episode. We 

also know more. We hadn’t grown our balance sheet like that, and 

we hadn’t shrunk it before. Now, we have experience with that, so 

we are moving back down to a level that will be appropriate for our 

new framework. By the way, we won’t go back to a framework 

where we were dealing with scarce reserves. We like the administrative rate framework that we are in now, but it is important that 

the balance sheet not just grow with every cycle, and I think I am 

very conscious of that. 

Mr. FLOOD. Chairman Powell, do you have an optimal Fed target 

for the size of what the balance sheet should look like, a number? 

Mr. POWELL. I will give you the idea, and that is, you find the 

number, but the idea is that it is smaller than now. It is a place 

where reserves are abundant and also have a little bit of a buffer 

on top of that so that we don’t accidentally run into reserve scarcity. Demand for reserves can be volatile, and you don’t want to 
23 

find yourself, as we did a few years back, suddenly finding that reserves were scarce, and we didn’t see it coming. And we then had 

to put more reserves into the system at a time when we didn’t 

want to be doing that. I think you want to have a level where we 

have ample reserves plus a buffer, and that will be a percent of 

GDP that we get down to, and we are moving in that direction 

pretty, pretty smartly. 

Mr. FLOOD. Chairman Powell, realistically, how quickly can the 

Federal Reserve unwind its balance sheet? What is the threshold 

beyond which an asset sell-off by the Federal Reserve would disrupt our markets? 

Mr. POWELL. We don’t sell assets. What we do is we allow them 

to mature and passively roll off, and that is what we are doing to 

the tune of about a trillion dollars a year, and we are in the middle 

of that process. Now, as it is an empirical question, you are going 

to find a level that is still ample plus a bit of a buffer, and that 

is how we are thinking about it. 

Mr. FLOOD. Thank you, Mr. Chairman. I would just reiterate my 

concern on this issue. I fear that having the Federal Reserve backstop so much of our economy through the holding of Treasuries and 

mortgage-backed securities is not sustainable long term. Thank 

you, Mr. Chairman. I yield back. 

Mr. BARR. The gentleman yields back. The gentleman from Nevada, Mr. Horsford, is recognized. 

Mr. HORSFORD. I thank the chairman and the ranking member 

for holding this important hearing, and thank you, Chair Powell, 

for appearing before the committee today. 

Before I begin, I would like to ask permission to enter into the 

record an editorial by the Las Vegas Sun, entitled, ‘‘Economy, infrastructure thrive when Dems have the reins,’’ dated June 16, 

2023. 

Mr. BARR. Without objection, it is so ordered. 

Mr. HORSFORD. During this time of increased economic uncertainty, it is more important than ever that the Federal Reserve fulfills its dual mission of maximizing employment and supporting 

price stability. There is no doubt that it is difficult, and the needle 

that has to be threaded is very specific. However, the human cost 

is simply too great for us to get this wrong. Sometimes, we need 

to be reminded that there are real people behind the economic 

data, and that the actions taken by both Congress and the Fed 

have real consequences for everyday Americans, everyday Americans who want to know that myself and my colleagues are dedicated to creating an economy that actually works for them, which 

is why I was pleased that last week the Federal Reserve decided 

to pause your interest rate hikes and take stock of the overall economic picture. 

Now, don’t get me wrong, there is certainly more work ahead of 

us, but with 13 million jobs added since President Biden took office, 

we should be rooting for America to succeed and not to fail. The 

strength of the labor market continues despite the multiple concurrent shocks that continue to reverberate throughout the global 

economy. And I believe our economy remains resilient, thanks to 

the historic investments that were included in the legislation 

passed last Congress and signed into law by President Biden. The 
24 

beneficiaries of these investments were the people, the middle 

class, not special interest. 

The Bipartisan Infrastructure Law is creating construction jobs 

and projects that will help ease supply chain challenges and ensure 

safer transportation for everyone. President Biden and congressional Democrats are investing in technology that will define the 

21st Century, components to generate solar and wind energy, semiconductors, and electric vehicles that will all be made here in 

America. 

Just last week, Treasury Secretary Yellen was before this committee and described how the transformational investments from 

the Inflation Reduction Act are ushering in a renaissance of domestic manufacturing. These are good-paying jobs, union jobs that are 

expanding our production capacity here at home, while reducing 

our reliance on goods imported from abroad. As I indicated, the editorial by my hometown newspaper, the Las Vegas Sun, remarks 

that annual investments in manufacturing construction has more 

than doubled its pre-pandemic levels. 

Furthermore, when we narrow the focus to the region including 

Nevada, the U.S. Census Bureau estimates that in just 2 years, 

private manufacturing construction increased almost tenfold. So, if 

we want to rebuild the American middle class, we must do so from 

the middle out, by investing in modern infrastructure and modern 

manufacturing facilities. But this does not mean that everything is 

improving equally. I have heard time and again from my constituents about the cost of housing being one of their biggest pain 

points. Our Monetary Policy Report points out that housing services prices have risen a shocking 8.5 percent over the 12-month period ending in April, and in my district, it is even worse. 

So, Chair Powell, at a time where it has become increasingly difficult for working Nevadans to purchase a home, I worry that rising mortgage rates will put working families even further behind 

on accessing the wealth and equity that a house provides. While 

higher rates have cooled some housing markets across the country, 

what do you see as the biggest remaining upward pressure on 

housing services, and what can we do in Congress to incentivize 

new home starts to hopefully moderate the imbalance between supply and demand in the housing market? 

Mr. POWELL. I think you are talking about largely longer-run factors here, and I think there has been for some time a shortage of 

housing. It is harder to get lots, it is harder to get workers, and 

in the pandemic, it had been harder to get materials and things 

like that, so there is certainly a need for more housing. I think during the pandemic, you had people wanting to live in houses rather 

than downtown in apartments because of COVID. You had low 

rates, and so you had 2 or 3 years of very, very high price increases 

for housing, and now that has flattened out a lot as we have raised 

rates and—— 

Mr. BARR. The gentleman’s time has expired. The gentleman 

from New York, Mr. Lawler, is recognized. 

Mr. LAWLER. Thank you, Mr. Chairman. Chairman Powell, you, 

the Fed’s Vice Chair for Supervision, and many others have indicated that the banking system is well-capitalized. Bank capitaliza-
25 

tion remained robust during the COVID shock and related shutdowns of economic activity, and in severe Fed stress testing. 

Nonetheless, the Vice Chair for Supervision wants to increase 

capital and other requirements on financial institutions. This will 

have substantial economic effects that will begin immediately, 

while you are still focusing on bringing inflation back to the Fed’s 

2-percent target. Excessively-high capital requirements will constrain credit provision to the economy, costing jobs, incomes, opportunities, and living standards. As my colleague, Mr. Garbarino, 

pointed out, a 1-percent increase in capital requirements could potentially reduce GDP by up to 16 basis points, based on the Basel 

Committee literature. 

On January 21, 2021, a 30-year fixed-rate mortgage had an interest rate of 2.77 percent. Now, for the same loan, individuals are 

looking at a 6.69 percent interest rate for a 30-year fixed-rate mortgage. For the median home valued at $436,800, the difference from 

less than 21⁄2 years ago to now equates to over $300,000 more over 

the course of the loan. For the median household making around 

$71,000 a year, that extra $10,000 a year out-of-pocket in mortgage 

costs is crushing. Some areas, like my district, are even harder hit 

due to the high cost of living and the lack of housing. Combine that 

with inflation at or above 4 percent, and these factors are taking 

a real toll on the average American family, including in the Hudson Valley. Further decreasing the availability of credit to households and businesses across the country would likely only worsen 

this crisis. 

So, Chairman Powell, do you agree that excessively-high capital 

levels constrain banks’ lending capacity, with spillover effects on 

jobs and living standards for Americans, and that effects would 

begin immediately independent of any proposed phase and timing? 

Mr. POWELL. I do think that, as I mentioned earlier, there is a 

tradeoff between safety and soundness and availability of capital, 

and you want to get that balance right. 

Mr. LAWLER. But respectfully, you have testified that there was 

more than enough capital in these banks. Where are we unsafe and 

unsound, that we would require more capital requirements? 

Mr. POWELL. As I mentioned, that is the question we are going 

to be asking, as we review the proposals when they do come forward. We don’t have a proposal in front of us at this point. And 

I think, as I mentioned, any increase in the capital for the large 

banks will need to be justified. I don’t know that there will be 

much in the way of capital increases proposed for banks, other 

than the very large banks, but we will have to see. 

Mr. LAWLER. So, you don’t believe regional and community banks 

will face the same requirements? 

Mr. POWELL. Very different requirements, I would think, as they 

do now. 

Mr. LAWLER. But you are not looking to increase the requirements on them? 

Mr. POWELL. We will have to see what the proposals turn out to 

be, honestly. They are still, to some extent, in motion, and once 

they are out, we can have lots of conversations about the specifics. 

But until they are, it is tough to do that. 
26 

Mr. LAWLER. And you will commit to providing this committee 

with all such analysis before any proposals come out? 

Mr. POWELL. I think there will be a proposal that comes to the 

Board sometime this summer, and the Board will vote on that, and 

we will obviously share whatever analysis we have. 

Mr. LAWLER. Are you concerned that any significant increase in 

capital could significantly jeopardize the Fed’s efforts to rein in inflation? 

Mr. POWELL. The thing about capital requirements is there 

would be a 90-day comment period, roughly. Something like that 

could be in that range, and then there would be a long period of 

considering the comments that are made, and then there would be 

movement toward coming to an agreement about what to finalize, 

so that would take many months. And then, you would be into a 

situation where there would be long phase ins, so I don’t really 

think capital requirements play into the near-term economic situation the way interest rate hikes do. 

Mr. LAWLER. According to the Bureau of Labor Statistic’s CPI In- flation Calculator, it takes $1.16 today to buy the same consumer 

goods and services as $1 purchased when President Biden took office in January of 2021. Do you agree that the outsized inflation 

we have seen since early 2021 has caused and continues to harm 

workers, retirees, and families trying to make ends meet and pay 

their bills? 

Mr. POWELL. I strongly agree with that, and that is why we are 

taking the measures we are taking. 

Mr. LAWLER. Thank you. 

Mr. BARR. The gentleman’s time has expired. The gentleman 

from North Carolina, Mr. Nickel, is recognized. 

Mr. NICKEL. Thanks, Chair Powell, for being here with us today. 

Back in 1995, I worked here in Congress as an intern for Dick 

Gephardt. I was in his press office, and we had newspapers, and 

my job was to clip out the articles and paste them on a sheet. But 

when I was here in 1995, the Grateful Dead were playing. It was 

one of Jerry Garcia’s last concerts, and I was just so disappointed 

that I missed that concert, but was excited to see from public reporting that you were at the most recent Dead & Company show. 

I have been to this version with John Mayer and enjoyed it, but 

we weren’t there. How was the show? Did you like it? 

Mr. POWELL. Oh, it was terrific. What can I say? It was great. 

I have been a Grateful Dead fan for 50 years. 

Mr. NICKEL. I have found one universal truth, which is that I 

like people who like the Grateful Dead. Having said that, I have 

limited time, but do you want any time to go back to some of the 

questions that you had? Do you want to elaborate on anything that 

you have said here so far today? 

Mr. POWELL. You are very kind to offer, but I am fine with the 

answers I have given so far, I believe. 

Mr. NICKEL. Well, back to that show, a lot of people there in Virginia, like my constituents, are very concerned about this economy. 

They are worried about the cost of groceries, rising inflation, and 

interest rates going up, and when we do these hearings, it is always big news. Things you say move markets and are very important, but Fed-speak is just so hard for my constituents and the 
27 

American people to understand. What can you tell the American 

people who are concerned about the economy in a way that they 

can really understand about where this economy really is heading? 

Mr. POWELL. I guess I would say this economy is very strong, 

and what is driving it now is just a very strong labor market. 

There is still significant demand for workers, there are more job 

openings than there are unemployed people, wages are moving up, 

and that is really what is driving the economy forward. People’s 

disposable incomes are coming up. Inflation is moving down gradually. The thing that troubles people, and I think the thing that accounts for the surveys you see, where, despite a historically-strong 

labor market, people are still concerned about the economy, it is 

really inflation. 

It is our job to bring inflation down. The way we do it, is by raising interest rates. And while that can be painful, what it does is 

it gradually slows down demand so that supply and demand can 

get back into alignment and so that we can have inflation running 

at 2 percent, and people can get on with their lives and basically 

not have to think about inflation. That is the definition of, ‘‘price 

stability,’’ from one standpoint is just that people can live their 

daily lives without thinking about inflation all the time. We want 

to get back to that place, and we are on a journey to get there. We 

have quite a ways to go, but we are making progress. 

Mr. NICKEL. I have always wondered this, and I think there is 

a pretty simple answer, but if Congress was in charge of setting 

interest rates and it became a political thing, do you think that is 

something that we could handle as a legislative body? 

Mr. POWELL. I wouldn’t want to comment on that. 

Mr. NICKEL. That is a safe answer. And I do want to just join 

in the chorus with a lot of my colleagues on both sides of the aisle 

here about capital requirements for banks. I brought this issue up 

with Vice Chair Barr, with Fed Governor Bowman, and in your 

written questions from the last time you were here. I didn’t get a 

chance to ask questions because of my seniority here on the committee, but you answered in writing, and you said we have to be 

mindful of the tradeoffs associated with adjusting capital levels as 

it could, ‘‘cause banks to reduce the availability of credit or to pass 

higher costs of credit on to consumers.’’ And you also said, ‘‘Capital 

and liquidity levels at our largest, most systemically important 

banks are at multi-decade highs.’’ 

My constituents sent me here to lower costs for working families, 

so increasing borrowing costs really hits them hard. As the Fed 

considers new capital requirements, how do you intend to strike 

that balance between the tradeoff that you talked about in your 

written response? 

Mr. POWELL. That is the balance. You said it very well. Stronger 

capital requirements mean we have a stronger banking system, 

and means it is more resilient to downturns and crises and things 

like that, so banks can continue to lend during even stressful 

times. That is very important, and we put a high value on that. 

And yet, of course, we know that at the margin, the cost of capital 

goes up for banks, and the cost of credit will go up. So, it is a balancing thing, and there isn’t any one simple model or answer. You 
28 

just have to make a judgment call based on that, and that is what 

we will be doing as these proposals are made and then assessed. 

Mr. NICKEL. Thank you. I yield back. 

Mr. NUNN. [presiding]. The gentleman’s time has expired. Thank 

you, Mr. Nickel. I look forward to joining you at the next concert 

with Chairman Powell. We will see how that works out. 

Chairman Powell, thank you very much for taking the time to be 

with us here today. I recognize, first of all, that you get feedback 

from every sector on how you are doing your job. You are charged 

with two mandates: price stability; and combating unemployment. 

As my colleagues have discussed today, the labor market is clearly 

very tight, and you should be credited with succeeding in maximum 

employment and being a partner in this. Unfortunately, as we have 

also heard and as the country is experiencing, we haven’t collectively been as lucky in terms of price stability. Core CPI is still 

over 4 percent, and services and housing costs remain very sticky. 

Given the economic uncertainty on how the Fed will bring inflation to its 2-percent mandate, can you quickly touch on how the 

bank capital requirements Vice Chair Barr is proposing—and I will 

be specific here. My Main Street businesses, especially farmers, 

family farms, and Iowans back in my district, really provide a 

backbone on this, and they depend heavily on this area. Do you 

think that they will be facing a more difficult and expensive credit 

environment as a result of this? 

Mr. POWELL. I don’t think so, particularly in the near term. First 

of all, many of those people will be dealing with regional and community banks rather than with the G-SIBs. But even with the GSIBs, as I mentioned, the phase in for higher capital, the process 

of publishing and then getting comments and evaluating those 

comments, and then coming to a broad agreement and consensus 

on what to implement and over what time period, that takes time, 

and so it will not be important. During this period of the next year 

or two when we are getting inflation back down to target and the 

economy is kind of normalizing, I don’t think the capital changes 

will have much of an effect in the near term. 

Mr. NUNN. Mr. Chairman, let me be sure that I am hearing you 

correctly. Vice Chair Barr is engaging with small businesses 

throughout the Midwest right now on potential knock-on effects 

from this holistic review. Some economic studies have found these 

knock-on effects will increase borrowing between $50 billion and 

$200 billion. As we look to cut this in half, is that the right thing 

to be doing? 

Mr. POWELL. Sorry, cut in half? 

Mr. NUNN. The inflation rate. 

Mr. POWELL. Honestly, I don’t think the two are really in conflict. We have an obligation to bring inflation back down to 2 percent over time, and we will do that, and we will use our tools to 

do that, but I think the question of bank capital is real. I don’t see 

it as a key factor in how we think about inflation because, again, 

it will take quite a while to decide what to do and then to implement. Some of the changes we are talking about will have multipleyear phase-in periods, for example. 

Mr. NUNN. Mr. Chairman, let me ask you on that implementation timeline, particularly for new capital standards, you said it 
29 

would be some years before it would go into effect. According to a 

report published last year by the Federal Reserve Bank of Cleveland, in the case of the implementation of Basel III, banks began 

to increase their capital ratios, ‘‘prior to the publication of specific 

language applicable to U.S. banks, and the bank responses we estimate to take place well before Basel III rules started to come into 

force after 2014.’’ Do you agree with the Cleveland Fed, and do you 

believe that our banks will begin to adjust as soon as the proposal 

is released? 

Mr. POWELL. Yes, I do, and it is not an absolute thing where they 

will wait until the effective date. They will certainly, and they may 

even be starting, but I would think the earlier you start, the more 

gradual the path will be. 

Mr. NUNN. Very quickly, I want to turn to a different subject 

which has been brought up by a number of my banks back home 

relating to a central bank digital currency (CBDC) or any Federalissued coin. We have seen how this Administration in the last Congress wanted to require anyone who made more than $600 on a 

third-party settlement organization like an eBay purchase has to 

report that to the IRS. The existing threshold before the law was 

modified was $20,000. That is how far this Administration wants 

to peek behind the curtain of what my constituents are spending 

their money on. 

And $600 in Iowa doesn’t go a long way. It is the equivalent of 

a PlayStation or paying for your kid’s dance classes. I am a dad 

of six. I digress on this, but I do want to know, specifically for my 

constituents back home, your thoughts on creating a central bank 

digital currency that tracks individuals, and if the Fed were to 

offer a direct individual account to citizens, wouldn’t that be a direct threat to the financial privacy of many Americans? 

Mr. POWELL. Potentially, and that is why it is not something we 

support. We would not support accounts at the Federal Reserve by 

individuals. If we were to—and we are a long way from this—support that at some point in the future, a CBDC would be one that 

was intermediated through the banking system and not directly at 

the Fed for exactly the reason you point out. 

Mr. NUNN. I am very happy to hear that. I think that is a good 

partnership with the individuals there and a respect for Americans 

across-the-board. With that, I yield back. 

I now recognize the gentlewoman from Colorado, Ms. Pettersen, 

for 5 minutes. 

Ms. PETTERSEN. Thank you, Mr. Chairman, and thank you, 

Chair Powell, for being with us again today. 

I come from Colorado. I was in the legislature for 10 years, and 

when the pandemic happened, I was one of the people who were 

unfortunately elected during that difficult time. When I think 

about what our country was going through a few years ago, where 

our economy was almost in free fall, completely shut down, our 

local governments were slashing their budgets, they were laying 

people off, and what that moment meant that we had to do in stepping up at the national level to infuse dollars to save our country’s 

economy. My frustration here is that we continue to talk about inflation as if it was spending just to spend money, instead of acknowledging the urgent crisis that this country and this world was 
30 

in, and what we needed to do in the moment to make sure that we 

were able to recover, keep our small businesses afloat, our local 

governments, and ultimately recover much more quickly than others. 

Since we talk about this often. I would like to know, if you look 

to other countries around the world who didn’t infuse dollars like 

we did, are there countries that we can look at to compare what 

the outcomes would be and what their recovery is like now? 

Mr. POWELL. Our recovery is by far the strongest of any country, 

and I would say the inflation that we have—actually, everybody 

has very high inflation, the United Kingdom, and many countries 

within Europe as well. 

Ms. PETTERSEN. Thank you. That was my next question, how we 

compare to other highly-developed economies on our recovery. It 

sounds like in the emergency that we were in, the hopefully oncein-a-century global pandemic, that the United States ultimately 

met the moment, and that when the American people look at what 

has been done, we should feel really good about where we are, but 

we know we have a long way to go. 

I also want to acknowledge something that comes up often, that 

rising debt leads to higher rates of inflation. Doesn’t that also include tax cuts, trillions of dollars of tax cuts that we couldn’t afford, that went on our rising debt? 

Mr. POWELL. In terms of today’s inflation? To your point, I think 

if you look around the world, there is a common factor that has 

driven inflation very high in lots of advanced economies, and it is 

the pandemic and it is everything about the pandemic: the closing 

of the economy; the reopening of the economy; the fiscal support; 

the monetary support; all of the things that happened went into 

high inflation. And inflation is coming down. We will look back on 

this, and we will be able to look back at a period of very high inflation, but I think it is not just monetary and fiscal policy. It is also 

just things to do with the pandemic, various shocks. 

Ms. PETTERSEN. Absolutely. It is hard to believe where we were 

a few years ago and where we are now, although we do have challenges ahead. Another frustration that I have here is our failed 

policies around immigration reform and providing legal pathways 

for workers here in this country. When I talk to business leaders 

across the country, they say that the number-one thing that we 

could do to address inflation is to address legal pathways for people 

who want to work here. You say your job is to address inflation. 

You are still limited only within the tools that you have. My question to you is, would an increased labor supply help supply chain 

issues and inflation in this country? 

Mr. POWELL. We are seeing that now very much. A little bit to 

our surprise, we have seen a bounce-back in labor force participation and also a significant return to the prior trend in immigration. 

And that, we believe, and most analysts would say, is part of why 

employers are finding the labor market to be a little bit less tight 

now. It is still extremely tight, but more labor supply is helping the 

labor market get back into balance, including through immigration. 

Ms. PETTERSEN. Great. Thank you. Another concern that I have 

is our inability to address legal pathways toward the United States 

and the consequences of not doing that to our economy, I really 
31 

worry about, in the long term, if we don’t address our labor shortage. I would like to know, if we are unable to provide these pathways, looking at the needs of this country, do you see this contributing to the rising costs and inflation here in the United States in 

the long term? 

Mr. POWELL. I am not sure about the long term, but I would say 

that, right now still, employers are reporting a very significant excess of demand for workers over the supply of workers, and so 

there is a lot of demand out there for people to work. 

Mr. NUNN. Thank you, Mr. Chairman. The gentlelady’s time has 

expired. 

I now recognize the gentlelady from Texas, Ms. De La Cruz, for 

5 minutes. 

Ms. DE LA CRUZ. I thank the chairman for holding this important hearing today. It is critical that this committee continue to explore how the Biden Administration’s ill-conceived policy and regulatory approaches are harming our nation’s economy. And thank 

you, Chair Powell, for appearing before us today. 

I would like to lead off with a question that I posed to Vice Chair 

Barr when he recently appeared before this committee. As the Representative for a largely-rural district where my constituents, of 

which 86 percent are Hispanic, heavily rely on smaller institutions 

or community banking institutions for their financial needs, I am 

concerned about Mr. Barr’s focus on factors that aren’t necessarily 

material to the recent bank failures. His report on Silicon Valley 

Bank seemed to go out of its way to advocate for higher capital levels as a cure for the recent bank failures instead of the failures of 

regulators and bank mismanagement. 

In fact, one of your other Federal Reserve colleagues, Governor 

Bowman, echoed these concerns in recent remarks when she said, 

‘‘The unique nature and business models of the banks that recently 

failed, in my view, do not justify imposing new, overly complex regulatory and supervisory expectations on a broad range of banks. If 

we allow this to occur, we will end up with a system of significantly 

fewer banks serving significantly fewer customers. Those who will 

likely bear the burden of this new banking system are those at the 

lower end of the economic spectrum, both individuals and businesses.’’ 

Just a couple of moments ago, Representative Donalds asked you 

a couple of questions, and your response was that you mentioned 

how important community banks are and that you are keeping 

them in mind with all that you do. As I speak with my local community and regional banks, they say that the increase in regulations and in capital requirements will really hurt them. With that 

being said, what I find being an outsider in politics, new to the political arena, is I find that people here in Washington, people who 

hold leadership positions, are often out of touch. So I want to ask 

you, Chair Powell, do you personally bank with a community bank? 

Mr. POWELL. I have, over time. Not currently, but yes, the last 

mortgage that my family and I had was—you would like the story; 

I can tell you someday—but we had a very large bank which sort 

of failed at the last minute to come through with our mortgage, 

and we went to the local community bank. And they knew my family and they knew the house, and they were able to give us a mort-
32 

gage without any difficulty within a few days. So, I have had a 

very positive experience with community banks. 

Ms. DE LA CRUZ. With your relationship with community banks 

in the past, how do you feel that increasing regulatory burdens 

would have consequences to these community banks? 

Mr. POWELL. I really think that the things we are looking at are 

not about community banks. They are about the very largest 

banks, and, to some extent, banks in the Silicon Valley Bank 

range, sort of $100 billion to $250 billion. I would consider a community bank to be under $50 billion and probably under $10 billion 

in assets. Those are not the focus of the regulatory reforms, I believe, that are going to be proposed to the Board for consideration 

this summer. 

Ms. DE LA CRUZ. And I will also hope that to be true because, 

as I said, in my district, we have a lot of community and regional 

banks that would suffer with increased regulation and capital requirements. I have very little time left, so I will yield back to the 

Chair. Thank you. 

Mr. NUNN. The gentlelady yields back. I now recognize the gentleman from California, Mr. Sherman, for 5 minutes. 

Mr. SHERMAN. I want to comment on one success story. Several years ago, there were $16 trillion of London Inter-Bank Offered 

Rate (LIBOR) instruments where the amount the debtor was supposed to pay the creditor was to be determined by the London 

Interbank Rate, and as of June of this year, that rate will no longer 

be published. Something unusual happened here in Washington. A 

year-and-a-half before the LIBOR hit the fan, Congress acted. You 

published your regulations in February, and the problem is solved. 

I want to pick up on the ranking member’s comment that it is 

critical that we deal with housing. There is a lot we can do in 

Washington, but we also need to get cities to allow the construction 

of apartment buildings and condos. Someone here has talked about 

the de-dollarization. We need to compete against the euro and 

against the yuan, but one place where Congress can act is with regard to crypto. The crypto billionaires have told us they want to 

displace the dollar. They are working for de-dollarization, and 

when billionaires tell you they are trying to hurt your country, you 

should believe them. 

There has been a discussion here as to whether it is the pandemic or Washington, D.C., policy that has caused the inflation. We 

have a perfect test case. Our annual inflation rate is now at 4 percent. The European Union—where Mr. Biden is not President and 

Mr. Powell is not head of their Federal Reserve—in May had 7.1 

percent inflation. The unemployment rate in the United States is 

3.7 percent. The European Union is at 6 percent. And since the 

pandemic began, GDP has grown in the United States 5.3 percent, 

and in the European Union, only 3.1 percent. I think it is pretty 

apparent that our policy has turned out to be actually better than 

Europe’s policy. 

Banks and bank regulators have said, oh, how could we possibly 

have anticipated the inflation and interest rates of 2023. Today, we 

have 4-percent inflation. That is almost exactly the average inflation rate over the last 50 years, much lower than it was in the 

Reagan Administration when we had 13.5-percent inflation, and 
33 

16-percent interest rates. And that is why I blame the management 

and also the regulators at Silicon Valley Bank for telling us that, 

oh, this was an unanticipated circumstance. It is certainly one of 

the things they could have anticipated. 

I will point out that the Congressional Budget Office and the 

University of Pennsylvania Wharton School of Business’ models 

both show that the estimated effect of the Inflation Reduction Act 

on inflation will be statistically indistinguishable from zero. So, we 

will accomplish a lot for the environment and not increase inflation. Of course, the recent action by Republicans to take away IRS 

enforcement will lead to higher deficits and higher inflation. The 

chairman of the committee tells us we don’t need regulation of our 

well-capitalized banks. Why are they well-capitalized? Because of 

our regulation, and I do want to focus on whether our banks really 

are well-capitalized. 

Mr. Powell, are our banks well-capitalized if you value their assets at today’s fair market value, where we have experienced higher interest rates and the value of the debt declines? And are they 

well-capitalized even if you assume that depositors are not just 

going to leave their money lying in the banks, but that the obligation the bank has to its depositors is valued at full face value, but 

the marketable securities and loan portfolio is priced at today’s interest rates? Under those circumstances, do we have a well-capitalized banking system? 

Mr. POWELL. I think you have to take the capital requirements 

as they are for purposes of this question. 

Mr. SHERMAN. That is the problem. Our capital requirements 

hide the facts that are unpleasant. 

Mr. POWELL. Right. 

Mr. SHERMAN. If you don’t hide the facts, are we well-capitalized? 

Mr. POWELL. Traditionally, as you know, a rising rate environment has increased the value of the deposit franchise, which more 

than, or at least, offsets any portfolio losses. 

Mr. SHERMAN. So, we are well-capitalized if depositors continue 

to be lazy and stupid? 

Mr. NUNN. The gentleman’s time has expired. Chairman Powell 

can submit any additional responses for the record. 

We now recognize the gentleman from Tennessee, Mr. Ogles. 

Mr. OGLES. Thank you, Mr. Chairman. Mr. Powell, as you know, 

when the COVID-19 pandemic started, the Federal Reserve began 

a round of quantitative easing referred to as QE4. Like many 

COVID policies, this program dragged on, not ending until March 

of 2022. To conduct this program, the Federal Reserve expanded its 

balance sheet with short-term, interest-bearing liabilities on one 

side, and long-term, interest-bearing assets on the other, and this 

was at a time of historically-low interest rates. When, predictably, 

expansionary fiscal monetary policy sent inflation to the highest 

level in 40 years, the Fed was forced to raise interest rates rapidly. 

Now, going back to one of my colleague’s questions about the 

bank losses and the result of that being poor management and failing to hedge against the interest rate environment, is it a fair summation that management and failure to hedge is what caused some 

of the bank losses? 
34 

Mr. POWELL. Certainly, many banks managed the interest rate 

risk that came along through that technique. 

Mr. OGLES. But some did not. Is that correct? 

Mr. POWELL. Some did not. 

Mr. OGLES. In October, the Fed suspended its remittances to the 

Treasury due to losses. The Mercatus Center estimates that the 

lost revenue for the Treasury will result in $760 billion over the 

next 10 years. So, it does concern me that Treasury is blaming 

banks for mismanagement when you, yourself, had to stop remittances and will suffer losses. 

When the Fed prepared its Semi-Annual Monetary Policy Reports through the time of QE4, none of those reports mentioned 

that interest rate risk would impact the government’s finances. 

Should that have been disclosed, or did the Fed not understand its 

own risk and the correlation to the interest rate environment? 

Mr. POWELL. What we do is, we remit all of our profits, and in 

the era of QE, those profits were enormous. We remitted something 

like $1.2 trillion in profits to the Treasury Department because we 

are funding purchases of long-term assets with issuance, as you 

pointed out, of overnight, lower-rate instruments. 

In a way, that is what was happening during the QE era. As we 

now enter an era of raising rates, that will turn around a little bit, 

but ultimately, we don’t manage at all for fiscal reasons. What we 

are managing to is maximum employment and price stability, and 

we are using our tools to achieve that. So, we don’t think of ourselves as trying to attain some kind of fiscal goal one way or the 

other. 

Mr. OGLES. I guess I will ask this question: When you look at the roughly $700 billion and below to the Treasury, how is that 

going to impact the President’s and Congress’ economic plans and 

policies going forward? Is it going to impact them negatively? 

Mr. POWELL. It doesn’t affect spending. Congress appropriates 

money, and the Executive Branch spends it. So, it will mean that 

more borrowing has to take place, and that could raise rates very 

marginally at the margin. That is how it would affect the budget, 

but it wouldn’t have a major effect on the budget. 

Mr. OGLES. I didn’t ask about the budget more over than our 

overall economic goals. And what I think a lot of us are getting at 

is when you look at Main Street America, and when you look at 

mortgage rates and how they are impacting a family’s ability to get 

a mortgage, you will see that someone who was eligible for 

$300,000 to buy a home now is no longer eligible for that home. 

You have people who are now upside down due to this expansionary interest rate environment. And I have concerns about future raises and the impact that is going to have on small businesses, the availability of credit, and, again, your average homeowner. The people who pay that or bear the burden of that are 

your lower-income and your middle-class families. 

Now, when you look at Silicon Valley Bank, which is supervised 

by the Fed, again, I get back to when you look at the interest rate 

increases, why there was not more warning or hedging from you 

as to the impact it may have on the fiscal system, the financial system and the banking system, because, as we well acknowledged on 

both sides of the aisle, there was some poor management, but the 
35 

regulators and the communication from the government was lacking. 

Mr. Chairman, I am out of time. Mr. Powell, thank you for being 

here, and I will yield back. 

Mr. NUNN. Thank you, Mr. Ogles. With that, the Chair recognizes the gentleman from Massachusetts, Mr. Lynch. 

Mr. LYNCH. Thank you, Mr. Chairman, and I thank the ranking 

member. Welcome, Chairman Powell. It’s good to see you again. 

Chairman Powell, I heard some of your comments over the last 

couple of days about the Fed seeking a softening in the labor market. And as a former union president for the iron workers, I always 

took a dim view of softening of the labor market because it reduced 

targeting power and that sort of thing. But I do admit that right 

now, unemployment rates are historically low all across the country. 

I think in Massachusetts, the Fed number is at 2.8 percent unemployment, Arkansas even less, and Alabama even less, so I understand the need for your position. But when you look at the 

Black and Latino unemployment rates in some of these major cities, they are double that. And I can’t help but see this as an opportunity to perhaps redouble our efforts to pull workers who don’t 

traditionally have strong connections to the job market and make 

things happen. 

At the Federal level, we fund about 25,000 job training programs, 

and according to the Government Accountability Office (GAO), we 

don’t do a very good job. I think the average program produces 

about three workers per year, but I am aware of the work that the 

Boston Fed is doing with the Gateway Cities Program. Susan Collins is running that in the Boston area. And the Fed actually helps 

us with data and coordination in cities like Brockton, Massachusetts, in my district, but also Fitchburg and other more rural areas. 

The Fed comes in and actually provides a great amount of expertise and has done wonderful, wonderful work. 

I am just wondering, are there other tools in our toolbox that the 

Fed could use to help? You could soften the labor market by adding 

workers as well, and I would rather see that on the supply side 

than simply restrict credit and squeeze companies into a position 

where they have to lay people off. And I am just wondering if there 

are other tools that you think might be available to us to accomplish that? 

Mr. POWELL. I will say two things. First, the softening that we 

have seen so far in the labor market has been around job openings 

declining. It has not been around unemployment increasing. We 

have seen some wages moderating back toward more sustainable 

levels. You will remember well the labor market before the pandemic where we had 2-percent inflation and a really, really tight 

labor market with no inflation, and a lot of the gains were going 

to people at the lower end. That is where we all want to get back 

to because what we have now is a very tight labor market, but inflation is so high that it is eating up the wage gains that these people make, so we need to get away from that. 

In terms of other tools, I visited East Hartford, which was another one of those cities. And I agree with you, we are not spending 

taxpayer money on this. We don’t have the authority to do it. We 
36 

convene people who have private-sector funds and we focus on a 

city, and I was really impressed. I don’t know if you have—it 

sounded like you have visited one or more of these cities. It is 

amazing what you can do, but as a convener really, rather than as 

an agency that has the authority to spend money on people. We do 

think about these things. We think that the most important thing 

we need to do for working people is to get inflation back under control because it is the people at the lower end of the income spectrum who suffer the most from high inflation. 

Mr. LYNCH. Yes. I just think there are deeper structural problems in the limitations within our workforce. I met yesterday with 

the International Brotherhood of Electrical Workers (IBEW) Local 

103 in Boston, and I talked to new electrician apprentices, mostly 

women of color, who are working days and their husbands are 

working nights, and it reflects in that very, very low unemployment number. You are getting around 2 percent. It is really people 

who are in between jobs, so there is no real reservoir of unemployed workers there that you can rely on. 

And I do appreciate the way the Fed came in and the Boston Fed 

came in and big-footed the situation in Fitchburg, where they 

brought a bunch of people together, and they accomplished a lot 

without spending Federal taxpayer money. And I am going to continue to try to find ways that we could use the resources that you 

have available. 

Mr. Chairman, I yield back. 

Mr. NUNN. Thank you, Mr. Lynch. The Chair recognizes the gentleman from Georgia, Mr. Loudermilk. 

Mr. LOUDERMILK. Thank you, Mr. Chairman. Mr. Powell, it’s 

good to see you again. Thank you for being here. 

I want to continue a dialogue that you and I had about FedNow, 

and I also want to continue voicing my concern that this product 

is a solution to a problem that the private sector is already addressing. The Real-Time Payments (RTP) network is already capable of instant settlement with a much greater degree of 

connectivity than FedNow will have at launch next month or in 

years to come. And my concern is also that the Fed has an undeniable advantage over the private sector in the payment space as it 

can clear transactions through Fed master accounts. Furthermore, 

the Fed already has options to improve transaction speeds through 

existing services. For example, the Fed has discussed extending the 

operation hours for the National Settlement Service since 2015. 

My first question is, why not respond to industry demand by improving existing services instead of launching a new one that can 

compete with private industry? 

Mr. POWELL. As you may remember, we surveyed all of the 

banks, not just the large banks, who set up RTP, which was a very 

positive development that we supported, and, overwhelmingly, the 

smaller banks wanted us to set up FedNow. This was a very overwhelming few among smaller banks. They wanted a Fed alternative to RTP, so we set it up. And I would agree with you that 

that is not a reason not to work on the efficiency of our other payment services, and I hope we are doing that—I know we are doing 

that. 
37 

Mr. LOUDERMILK. We had also discussed in the past about setting up some guardrails to protect customers from accidental or 

fraudulent transactions, and we know that is a big issue across the 

entire financial services sector. And in response to that, you know 

that the banks already have procedures for customers to report unintentional transactions, and FedNow will come up with a suite of 

features as well to help institutions investigate and remedy any 

unintentional or fraudulent transactions. However, with real-time 

settlements, this becomes a whole lot more difficult than just debiting the account that receives funds by mistake. Can you elaborate 

on how you are going to handle this protection? 

Mr. POWELL. Yes, and of course, RTP faces the exact same 

issues. It is a problem with real-time payments. You just have to 

have very high, extra high levels of security around the payments, 

whom the payee is, and that sort of thing. And we do think we can 

master that and build that in, again, as any faster payment. 

Mr. LOUDERMILK. Do you have any ideas of the direction that you 

are looking to go? How are you going to be able to resolve it, or 

is this just something you are beginning to look into? 

Mr. POWELL. No, I think we have built in very strong safeguards. 

I can’t give you the technology answer, but we will be happy to 

supply that. 

Mr. LOUDERMILK. Yes, if you could supply that, I would appreciate it. 

I just have a couple of other questions. Will the Federal Reserve 

itself use FedNow for real-time payments between banks in the 

System? 

Mr. POWELL. I’m sorry, will it—— 

Mr. LOUDERMILK. Are you going to use FedNow for real-time 

payments between banks within the System? 

Mr. POWELL. Yes, that is what it is for, it is an interbank payment system that allows banks to offer real-time payments to their 

customers. 

Mr. LOUDERMILK. Okay. With that, I am going to diverge just a 

little bit. I have dealt, in the past at the State level, with government competing with private industry. We run into this problem 

where the government has an undeniable advantage. In this case, 

it had to do with internet services, where city governments had 

gotten involved in internet servicing and started competing against 

private providers. And the issue came that the city governments 

were undercutting the private providers because of the poll access 

fee. So, we passed legislation in the State of Georgia which required that any municipal government that provides a service that 

competes with private industry has to assess themselves the same 

fees. 

With that in mind, will transactions between Federal Reserve 

Banks be subject to the same rules and fees as other banks? Are 

you going to charge yourself the same fees as private industry and 

abide by the same rules as private industry? 

Mr. POWELL. I don’t know the answer to that. In the payment 

space, there are many, many instances of a government-operated 

payment system operating side by side with a private-sector one. 

It is not something I would advocate broadly for in the economy. 

Think about the Automated Clearing House (ACH). Think about 
38 

Fedwire. There are private-sector and public-sector payment utilities operating next to each other in the United States and around 

the world. 

Mr. LOUDERMILK. Okay. Thank you. My time has expired, so I 

yield back. 

Mrs. WAGNER. [presiding]. The gentleman yields back. The gentleman from California, Mr. Vargas, is now recognized for 5 minutes. 

Mr. VARGAS. Thank you very much, Madam Chairwoman. I appreciate the opportunity. I want to thank the ranking member, too. 

Thank you. 

Chairman Powell, I have always had great confidence in you, and 

I have told you that personally. Now that you are a Deadhead, 

though, I am not quite sure. This is after 50 years. Anyway, again, 

thank you very much for being here. I appreciate the service you 

have done for our nation. 

One of my colleagues was talking about the difference in inflation rates in the United States and Europe, on both sides, actually. 

One of my colleagues on our side talked about that. And I was wondering if you saw the headline today in the New York Times about 

the U.K. inflation rate, and you saw that they are running, I think, 

at 8-something percent. 

Mr. POWELL. Yes, I did see that. 

Mr. VARGAS. And you were asked a question by the gentleman 

on the other side of the aisle about how when the Biden Administration took over, what you could buy for $1 now costs $1.16, and 

that was hurting consumers. And you said, ‘‘I strongly agree.’’ But 

the question obviously inferred that that inflation was the fault of 

the Biden Administration. That is the whole point of the question. 

Mr. POWELL. That wasn’t the question I answered, by the way. 

Mr. VARGAS. That is right. And I was going to say that, and I 

will give you an opportunity to answer that because you later said 

that the pandemic was the issue all around the world. Is the Biden 

Administration the cause of all this inflation? 

Mr. POWELL. Just to be clear, the question I answered was, is inflation hurting people? It was nothing to do with the cause of the 

inflation. 

Mr. VARGAS. But to infer, Mr. Chairman, when you say that this 

has happened during the time of the Biden Administration, I think 

the question clearly infers that. 

Mr. POWELL. I think you understand the question I was really 

answering. I guess I would say, again, people are going to be unpacking the causes of this inflation. Many academic careers will be 

built on new ways to look at this. Former Fed Chairman Bernanke 

delivered a paper with a colleague just a couple of weeks ago at the 

Brookings Institution on this, and I just think you see inflation everywhere in the world. There is a common factor here, which has 

to do with the pandemic. 

There is also room for fiscal policy, and there is room for monetary policy in the explanation, and I just think it is very hard to 

unpack that. We don’t render judgment on fiscal policy. We don’t 

support it. We don’t criticize it. We take it as something that arrives at our front door. No matter who is President, no matter what 
39 

fiscal policy is, it is not something we play a role in commenting 

on or criticizing or praising. 

Mr. VARGAS. I appreciate the answer. I wanted to give you an opportunity just to make sure if there was any confusion about that. 

The confusion was cleared up, and I think you have cleared it up. 

Now, I want you to answer a question that you didn’t answer, 

that you passed on. The question was if Congress should be in 

charge of setting the Federal funds rate. I can’t think of a worse 

idea. The only worse idea, I think, might be another idea that was 

set forward earlier, that maybe we should be involved in supervising the banks. In Congress, we can’t even figure out appliances 

here. We closed down the government over appliances. We can’t 

even figure that out. I don’t know how in the world we would be 

setting rates and how in the world we would be supervising banks. 

Again, I think you guys can do a tighter job of supervising banks. 

I do think that there were, and you guys have admitted to that 

with the Silicon Valley Bank, and I hope you do, and I know you 

are looking at these regulations. It was brought up that since 2008, 

2009, the capital requirements have gone up, and the banks generally have done well in the stress test. What was the law that 

caused the rates, the capital requirements to go up? 

Mr. POWELL. It was a combination of the Dodd-Frank Act and 

also the Basel Committee. 

Mr. VARGAS. Of course. And those are the two things that I have 

heard from colleagues on the other side, that they just keep beating 

up on. They don’t do it as much now. It is the Consumer Financial 

Protection Bureau (CFPB) now. But that was the choir, again, once 

again, just saying it is a terrible Act, but the reality is it probably 

saved banking in the United States, and I appreciate it. 

Lastly, I would just comment, and you don’t have to comment. 

I am just going to make this comment. Obviously, your focus is 

narrow and should be, but the notion of climate change is important. I do think that it is affecting the economy. I do think that it 

is affecting our world. And I do think that we have had our head 

in the sand for way too long on this issue, and we have to do something about it. Obviously, that is not your mandate, but obviously, 

it is important, and I hope we do something about it. We don’t have 

the courage to do that in Congress. That is why I think others are 

doing it for us, but we have to do something. We see the bigger 

hurricanes. We see these things happening and it is because of our 

participation in making it happen. Thank you very much. 

Mrs. WAGNER. The gentleman’s time has expired. The Chair now 

recognizes the gentleman from Oklahoma, Mr. Lucas, for 5 minutes. 

Mr. LUCAS. Thank you, Madam Chairwoman, and Chairman 

Powell, it is good to see you, as always. 

Mr. POWELL. You, as well. 

Mr. LUCAS. Many of my colleagues today, of course, have expressed their concerns about the upcoming Basel III revisions, and 

I hope you will continue this dialogue with the committee once the 

joint rule is proposed and is open for public comment. 

I would like to follow up with a topic we discussed back in 

March. I am sure you are keenly aware of how important it is for 

banks and companies to manage interest rate risk, particularly 
40 

over the last several years. The Silicon Valley Bank made that very 

clear. Could you speak generally to how hedging interest rate risk 

is an important risk management tool for U.S. banks and companies? 

Mr. POWELL. I think you see the reality of it here. When rates 

go up, banks are encouraged by their supervisors and their own internal personnel and risk committees that they need to manage 

that risk, and most U.S. banks did a good or adequate job of that. 

I would say it is a fundamental risk of banking, one of the most 

basic risks, along with credit risk. 

Mr. LUCAS. Exactly. And on that point, I have heard concerns 

that the Fed’s Basel III revisions could increase costs for derivatives end users. Whether hedging interest rate risk or commodity 

price risk, I am optimistic that these concerns will be addressed. 

Having said that, these revisions to capital requirements do not 

exist in a vacuum. The SEC is proposing major changes of their 

own. Last week, I asked Secretary Yellen if Treasury is coordinating with the Fed and the SEC on economic analysis as necessary to understand the potential consequences of U.S. banks implementing both significant market structure changes and increased capital requirements associated with market activities. The 

Secretary responded that the Fed is, in fact, coordinating with 

Treasury on this analysis. Are you aware of this coordination, and 

have you personally been a part of these conversations? 

Mr. POWELL. I have not been a part of those conversations, but 

I do understand that that is correct. 

Mr. LUCAS. Okay. Chairman Powell, I would like to follow up 

with you on your conversation with Congressman Gonzalez from 

earlier today. You have assured this committee that the Fed is not 

a climate policymaker, and I appreciate your commitment to this. 

However, I am concerned that the Fed’s regulatory toolkit would be 

utilized in a way that would, in effect, require the Federal Reserve 

to make policy decisions on climate change. We have seen other 

U.S. financial regulators embark on significant climate 

rulemakings, such as the SEC. 

Chairman Powell, are there principles you keep in mind when 

ensuring that the Fed doesn’t give in to, shall we say, political 

pressure around things like climate change? 

Mr. POWELL. There are. And for a starter, one would be that we 

don’t see it as at all appropriate for us to tell banks what legal 

businesses they can lend to; that is not our role. We don’t allocate 

credit, so what we do is we supervise banks to make sure that they 

understand and can manage the risks that they are running. And 

we are thinking of that as our point of contact with climate change 

in the sense that it is another risk that over time, banks need to 

be able to analyze and assess. 

Fundamentally, though, as I mentioned earlier, climate change is 

going to be a very important issue for a long time, and it needs to 

be addressed principally by elected people because it has enormous 

distributive consequences, and we don’t have a mandate to deal directly with climate change as a policymaker. It does arise in connection with bank supervision, but that is not the heart of bank supervision. That is just a small part. 
41 

Mr. LUCAS. I very much appreciate those comments. On another 

topic, I would like to discuss the Fed’s balance sheet, which currently stands at around $8.5 trillion. As you know, the size of the 

balance sheet more than doubled as the Fed worked diligently to 

stabilize markets during the height of the pandemic. Now, as the 

Fed begins to reduce the balance sheet, could you explain this process and describe the levels of securities that the Fed would look to 

maintain in the long term? 

Mr. POWELL. The way the process works is that securities mature and they roll off our balance sheet, and that is the way it 

works, and there is a cap for mortgage-backed securities and also 

for Treasuries so it doesn’t get too large. And if you hit that cap 

month upon month, it works out to roughly a little less than a trillion dollars a year in shrinkage, which is a whole lot faster than 

what we did in the last cycle. But then again, the balance sheet 

is that much bigger. In terms of the level, we are thinking about 

a level that will allow us to operate our abundant reserves regime 

with enough of a buffer on top of it so that reserves won’t accidentally become scarce. I can follow up more with you on this. 

Mr. LUCAS. Thank you. My time has expired, Madam Chairwoman. 

Mrs. WAGNER. The gentleman yields back. The gentlewoman 

from Ohio, Mrs. Beatty, is now recognized for 5 minutes. 

Mrs. BEATTY. Thank you, Madam Chairwoman. And thank you, 

Chair Powell, for being here today. I have two questions I am going 

to try to quickly get through. The first question on the U.S. dollar 

dominance is kind of a follow-up to Congressman Torres’ question. 

Chair Powell, in our National Security Subcommittee, of which 

I am the ranking member, we have been discussing the importance 

of preserving the U.S. dollar’s status as the global reserve currency. 

Can you share with us the current status of dollar dominance as 

it stands today and whether there are risks to the strength of the 

U.S. dollar in the international financial system? And if so, what 

are some of the risks? 

Mr. POWELL. The U.S. dollar is still the dominant reserve currency in the world, and that is principally thought to be as a result 

of our liquid capital markets, the rule of law, strong democratic institutions, price stability over the years, and, critically, its openness; money can come in and out of the United States without all 

sorts of legal restrictions and things like that. All of those things 

are necessary to provide the world’s reserve currency. We have 

them. There is not another economy that has all of those features. 

So as long as we are a country of rule of law, and relative price 

stability, and strong democratic institutions, and open capital accounts, we can continue to be the world’s reserve currency. History 

shows that this is not a permanent status, but it is a lasting one. 

And I think in the case of the United States, as long as we maintain those characteristics of our government and our country, then 

we can continue to be the world’s reserve currency. 

Mrs. BEATTY. Okay. Thank you. Let me go to another question 

that will not be foreign to you. As the former Chair of our Subcommittee on Diversity and Inclusion, I asked you and others of 

your colleagues, and let me just say for the record, Madam Chairwoman, that Chair Powell was always on point, and went out of 
42 

his way, in my opinion, to make sure that there was fairness and 

equity for all people. In light of that, I would like to follow up with 

Ranking Member Waters’ comments, and maybe Congresswoman 

Velazquez—maybe what she was talking about. 

Several of our colleagues here and in the Senate felt that the 

person who preceded you—it had been stated by many of us that 

we thought, through banking deregulation, he was enabling risky 

banking practices and failing to combat lending discrimination, 

which might have perpetuated racial inequities. A few weeks ago, 

Chairman Powell, on June the 7th, you said that, ‘‘We understand 

at the Fed that our actions affect communities, families, and businesses across the country, and everything we do at the Fed is in 

the service to our public mission.’’ Could you maybe elaborate, 

since the time ran out with Ranking Member Waters—is there anything you would like to share with us that you do at the Fed that 

would dispel that there are things that you are not looking at that 

cause one or more Members of Congress to think that it is perpetuating racial inequities? 

Mr. POWELL. As you know, we do call out disparate economic 

characteristics of different demographic groups, including by race, 

and we want those facts to remain present in the room as we are 

making our decisions. We try to think of maximum employment, 

we do think of it as a broad and inclusive goal, meaning we are 

not just looking at the aggregate level. I think it is important to 

keep those facts in your head as you think about monetary policy. 

I will say, though, that we have one Federal funds rate, and we 

don’t really have tools that address distribution and historical inequities and things like that. Really, the Fed is not an agency that 

has those things. The best thing we can do for everybody, including, in particular, low- and moderate-income communities, is to 

maintain price stability over a long period of time, and on top of 

that, to maintain a very, very strong labor market. Strong labor 

market conditions are the single biggest contribution we can make 

in this area. 

Mrs. BEATTY. Thank you. And let me end by saying I appreciate 

your comments when you said that you realize that high inflation 

imposes hardships as it erodes purchasing powers for food and 

housing from the least of us. Thank you so much for being sensitive 

to everyone. 

Mrs. WAGNER. The gentlelady’s time has expired. The Chair now 

recognizes the gentleman from Michigan, Mr. Huizenga, for 5 minutes. 

Mr. HUIZENGA. Thank you, Madam Chairwoman, and, Chairman 

Powell, it’s good to see you again. 

I wanted to follow up on an exchange that we had back in March, 

this past March, where we were discussing the parameters highlighted in the Federal Reserve Board’s legal opinions that outlined 

how asset managers can operate without being deemed, ‘‘in control 

of a regular bank or a bank holding company.’’ Letters from the 

Fed’s legal division also include certain commitments made by 

these asset managers to ensure the same result. However, it is no 

secret that this percentage of ownership held by asset managers 

will constantly fluctuate as shares are purchased and sold on a 

daily basis. 
43 

With the ever-changing ownership structure, someone must ensure asset managers are complying with not only these opinion letters—your opinion letters prepared by your own staff—but also 

with the statutory and regulatory framework that the letters outline. 

So, Chair Powell, I would like to ask you again, is the Fed taking 

any steps to assess or monitor whether Vanguard, BlackRock, and 

others are complying with these commitments made in November 

of 2019 and December of 2020, respectively? Is that ongoing? 

Mr. POWELL. Can you give me one second? 

Mr. HUIZENGA. Okay. 

Mr. POWELL. Sorry. That is a very specific question, and I didn’t 

know the answer. I would say this: We are broadly monitoring the 

situation. I don’t know that we have a particular focus on the asset 

managers. 

Mr. HUIZENGA. Okay. Those were opinion letters put out by your 

folks outlining very specific things that could or could not happen. 

And back in March when I brought this up, and now again today, 

I am looking to find out who is actually minding the store on that, 

and it is a little concerning that we don’t have an answer on that. 

I guess we will continue this conversation, and maybe you can answer this: What Division at the Fed is responsible for reviewing 

and monitoring an asset managers’ compliance with these opinion 

letters issued by the Board’s legal division? 

Mr. POWELL. It would be the General Counsel’s office. We don’t 

have any reason to think that they are not in compliance, by the 

way. 

Mr. HUIZENGA. But nobody is checking? 

Mr. POWELL. We will check. 

Mr. HUIZENGA. Okay. 

Mr. POWELL. I think we know what we are going to find. 

Mr. HUIZENGA. I would like to know what you are going to find, 

not what you think you are going to find on that, so thank you. I 

will be following up with a letter to include some more detailed 

questions on the topic, and I assume you will commit to getting us 

a timely answer to that. 

Mr. POWELL. I think we offered your staff a briefing on this, by 

the way. 

Mr. HUIZENGA. Yes, and there was a briefing, and let me be 

clear, I appreciate the cooperation that has happened. We have also 

had some other briefings. There have been a number of briefings 

that we have requested, and, frankly your division of government 

has been more helpful than others, shall we say. 

I am going to quickly pivot to the committee’s investigation of the 

Silicon Valley Bank failure. Your staff has been working to get us 

some answers on our outstanding questions. You did your own report. Now, it is our turn, and can you appreciate that our committee, is conducting its own independent review of what happened 

in March? 

Mr. POWELL. Yes, very much so. 

Mr. HUIZENGA. Okay. Thank you. Will you commit to producing 

the interview notes and allow us access to the staff who participated in the interviews conducted for the Fed’s own internal review 

of the bank supervision report? 
44 

Mr. POWELL. I am not in the middle of that discussion. I don’t 

know where that stands, so I don’t want to make commitments 

that I can’t back up. But I will be happy to find out where that 

discussion stands and try to work with you. 

Mr. HUIZENGA. Okay. We are going to be following up for sure 

on that. When Vice Chair Barr concluded that a, ‘‘culture shift’’— 

his words—‘‘happened,’’ do you know if the Fed officials spoke with 

examiners of other banks, or was this conclusion made solely after 

the review of SVB? In other words, did they find some systemic 

problem throughout the Fed? 

Mr. POWELL. The thing is, I didn’t play any role, by design, in 

the preparation of the report, and I am reluctant—I think I know 

the answer, but I don’t want to guess. We can provide you with a 

100-percent clear answer on that, and I would rather not speculate. 

Mr. HUIZENGA. Okay. Along with the FDIC and the Department 

of the Treasury, you invoked the systemic risk exemption (SRE) for 

both Silicon Valley Bank and Signature Bank, guaranteeing all depositors would be made whole. For example, regulators could have 

used the Orderly Liquidation Authority (OLA), the very tool DoddFrank intended to resolve the too-big-to-fail institutions, while protecting taxpayers. Why was the decision to use SRE made, and do 

you think that we have now lowered the bar to use SRE in future 

bank failures? 

Mr. POWELL. I hope we don’t have to face that question again as 

long as I live. 

Mr. HUIZENGA. We all do. But has a new bar been set? No pun 

intended. 

Mr. POWELL. I would say this. This happened with no warning 

in the middle of the night, Thursday night, and less than 12 hours 

later, we were on the phone with the FDIC, and they were deciding 

to close the institution and to haircut uninsured depositors. So, it 

was an emergency situation over that weekend. We could see that 

there was an electronic run building up, and we did what we had 

to do to address that and, I think, successfully. 

Mrs. WAGNER. The gentleman’s time has expired. The Chair now 

recognizes the gentleman from Illinois, Mr. Foster, for 5 minutes. 

Mr. FOSTER. Thank you, Madam Chairwoman, and thank you, 

Mr. Powell for being here today. 

Wars have historically been associated with elevated levels of inflation worldwide, although the relationship is complicated and 

wars can have impacts on both supply and demand. Higher inflation may just be one of the many prices that humanity pays for the 

decision to go to war. 

Now, we don’t have boots on the ground, but there is no doubt 

that in terms of supply disruption and military spending, both Europe and the U.S. are effectively at war in support of the freedom 

of the people of Ukraine. My question is, is the 2-percent inflation 

target a realistic and appropriate goal during a time when much 

of the world is effectively at war, or should the 2-percent goal be 

thought of as a goal for normal times, with policies being put in 

place that will return to 2 percent when the war is over, or at least 

when we have decoupled adequately from the Russian economy? 

Mr. POWELL. Two percent is our goal, and it will remain our goal. 

It is a medium-term goal, so we are using our tools to get the infla-
45 

tion level back down to 2 percent. We are not considering changing 

it because of the war in Ukraine, and I don’t know that that is 

playing a particularly important role in inflation today, although 

when energy prices and commodity prices went up at the beginning 

of the war, it certainly was. 

Mr. FOSTER. And certainly, it is an important factor for Europe 

still—— 

Mr. POWELL. Yes, the disruption particularly. 

Mr. FOSTER. Just more generally, you have been trying to deal 

with this question of how you balance your dual mandate, and 

whenever you are trying to optimize simultaneously two different 

things, the first step is to put them into common units. Just to be 

specific here, let’s say that you are missing your unemployment 

goal by 1 percent, and you are missing your inflation goal by 1 percent in the opposite direction. At some point, do those two cancel 

each other out? Is 1 percent in one goal equivalent to 1 percent in 

the other, or do you need a 2 percent missing of the unemployment 

target? There must be that coefficient there in the Taylor Rule and 

things like this that try to predict your behavior, but internally, 

how do you view the difference between a 1 percent unemployment 

missing of the target versus a 1 percent of inflation? 

Mr. POWELL. The Taylor Rule is a pretty good place to start 

there, with the same coefficient on both variables. 

Mr. FOSTER. Is that really true? I don’t know. I would have to 

go look at it. 

Mr. POWELL. In the original Taylor Rule. 

Mr. FOSTER. Okay, because it is a coincidence if the coefficient 

is 1, because you could choose a quarterly inflation target or an annual or a decade-old inflation target numerically and get very different numbers. 

Mr. POWELL. There is significant amount of research about the 

relative social costs of inflation and unemployment, and you 

wouldn’t want to ignore that research either, so I think there will 

be a lot of judgment in this. At the current moment, it is not a 

question, because the labor market is extraordinarily strong, and 

we are very far from our inflation targets. 

Mr. FOSTER. But you are getting complaints from business that 

the labor market may be too tight. At least, it is viewed, from the 

Taylor Rule point of view, that there is a penalty that you pay 

when the unemployment gets too small. There is a target you are 

trying to hit. 

Mr. POWELL. But both sides are calling for tight policy. 

Mr. FOSTER. Yes, that is correct at present, but you can certainly 

foresee times when they will be in tension and they historically 

have been. So, you are saying that pretty much it is a 1 percent 

on both? 

Mr. POWELL. I think that is a starting place. I think it doesn’t 

lend itself to that level of precision. 

Mr. FOSTER. It is either that or you have to face questions like 

you have been facing for the last decade, and just how do you balance this? In terms of the internet or electronic runs on banks, it 

seems like that is a new thing that is going to have to inform bank 

capital and liquidity providers. The first question is, if you get a 

significant electronic run on a significant size bank, is there anyone 
46 

but the Federal Reserve that can provide that emergency assistance, or do you pretty much have to be the only line of defense 

against big internet runs? 

Mr. POWELL. I think regulation and supervision can play a role 

in that as well. 

Mr. FOSTER. That has been stopping the run from starting, right? 

Mr. POWELL. Yes. 

Mr. FOSTER. But part of that stopping the run from starting is 

knowing that if it starts, there is someone or some entity that can 

stop it. 

Mr. POWELL. Or the lender of last resort, and that is something 

that only the central bank can be or do. But I would say changes 

to regulation to ensure that you don’t have this mismatch between 

runnable liabilities and available cash to fund their running is 

something we can address and will address through regulation and 

supervision. 

Mr. FOSTER. Thank you. I yield back. 

Mrs. WAGNER. The gentleman’s time has expired. The Chair now 

recognizes herself for 5 minutes for questioning. 

Welcome, Chairman Powell. I want to start by asking about the 

Federal Open Market Committee’s (FOMC’s) latest forecast. It predicted the core inflation will fall below 3 percent within a year. 

This forecast has been the exact same for each Fed meeting over 

the past 2 years and has been wrong each and every time. Why do 

FOMC participants continue to make the same forecast, sir, and 

what data are they reviewing to make this forecast? 

Mr. POWELL. In the world of economic forecasting, we don’t really 

have any advantage over private-sector forecasters who have been 

at this. There are a number of private-sector forecasters that are 

well-resourced, and the data are all public. We don’t have private 

data. That is not how this works. And I think, essentially, all forecasters have made the same mistake, which is at the beginning, 

thinking that the supply chain problems would be resolved quickly, 

and workers would come back to work quickly, and things like 

that. Inflation has consistently surprised us, and essentially all 

other forecasters, by being more persistent than expected, and I 

think we have come to expect that and expect it to be more persistent. 

Mrs. WAGNER. It seems that we have moved way past the whole 

transitory thing. And for the 2 full years down, they have been saying it is going to be under 3 percent, and clearly, they have missed 

that, so it was just a little concerning to me if there was something 

that we are missing. 

Let me move on. In your press conference last week, sir, you 

stated that, ‘‘The conditions we need to see in place to get inflation 

down are coming into place.’’ What conditions are you seeing that 

show that we are moving in the right direction, because I can tell 

you, my constituents are still feeling great pain from this inflation 

that continues to persist? 

Mr. POWELL. There are underlying conditions that I will mention, 

but the point is, you get them in place, and then the process of inflation moving down will take a significant amount of time, and we 

have been consistent in saying that. And the conditions I mentioned would be: first, we need economic growth to be slower than 
47 

to be modest, and it has been at a modest level, so that is happening; second, we need the supply chain bottlenecks to go away 

and get better and improved; and third, we need the sort of mismatch between demand and supply in the labor market to diminish, and that has been happening. 

So, all of those things are happening much later and much more 

slowly than we would hope. And my Committee and I do believe 

that the process of bringing inflation down is going to be a relatively lengthy one, longer than we expected. 

Mrs. WAGNER. It is clear that the spending on consumer services, 

for example, a car oil change, a haircut, or a concert ticket, remain 

almost unresponsive to rate hikes. Do you have a projection for 

when we might see this spending go down? 

Mr. POWELL. Non-housing services, the broad service sector is famously less responsive to and less focused on rate hikes and the 

cost of capital. So, what we think that is about half of the core inflation, a little bit more than. We think, and I think broadly that 

this is what forecasters think, that it will take some softening in 

labor market conditions because in that service sector, it is very 

labor-intensive. By far, the largest cost from most service companies is labor, so what you want to see is rebalancing. So, the demand for labor and supply, a lot of that can happen through fewer 

job openings and things like that, and we do see it happening. 

Mrs. WAGNER. The Consumer Price Index (CPI), which measures 

the price of everything from groceries to cars and to rent, has, in 

fact, declined from its peak. But the Personal Consumption Expenditures (PCE) Index, which measures, as we were talking 

about, consumer spending, remains historically high. How else can 

you account for this difference when it comes to a rate hike pause? 

Mr. POWELL. We never used the word, ‘‘pause,’’ and I wouldn’t 

use it here today. What we did was we agreed to maintain the rate 

at that meeting. Almost every single one, 16 of the 18 participants 

on the FOMC, wrote down that they do believe it will be appropriate to raise rates, and a big majority—— 

Mrs. WAGNER. Yes. 

Mr. POWELL. ——raise rates twice this year. And I think that is 

a pretty good guess of what will happen if the economy performs 

about as expected. 

Mrs. WAGNER. Yes, I think it is right. More rate hikes likely are 

needed to bring inflation back down to the 2 percent, and we are 

concerned about a hard landing, about a recession. 

Anyway, my time has expired, and I now recognize the gentleman from Illinois, Mr. Casten, for 5 minutes. 

Mr. CASTEN. Thank you, Madam Chairwoman. And thank you, 

Chair Powell for being here. 

In June of 2021, at the Green Swan conference, you said, ‘‘Climate change poses profound challenges for the global economy and 

the financial system.’’ In October of 2021, FSOC’s report on Climate-related Financial Risk, for the first time identified climate 

change as an emerging threat to U.S. financial stability. And in December of last year, the Fed released climate supervisory principles 

for large banks that said, ‘‘The financial impacts that result from 

the economic impacts of climate change and the transition to a 

lower carbon economy pose an emerging risk to the safety and 
48 

soundness of financial institutions and the financial stability of the 

United States.’’ 

You have made many comments today that I think are broadly 

consistent with that in your role, and I appreciate the comments 

you have made in that capacity. Can I safely conclude that in June 

of 2023, 6 months after that release, the Fed’s position is still that 

climate change presents a risk to the global economy and the financial system? 

Mr. POWELL. Yes. I hasten to add, though, that our role in this 

is an important but quite small one around bank regulation. 

Mr. CASTEN. Understood, and I am not asking for the role. I just 

want to clarify that the reason I asked that question is because on 

May 11th, your colleague, Christopher Waller, at a speech in Spain 

said, ‘‘Climate change does not pose a serious risk to the safety and 

soundness of large banks or the financial stability of the United 

States,’’ and went on to say that the risks posed by climate change 

are not sufficiently unique or material to merit special treatment 

relative to others. Should we understand as we sit here that Mr. 

Waller was speaking in his personal capacity and not as a designee 

of the Fed, if indeed, Fed policy hasn’t changed since December 

2022? 

Mr. POWELL. I don’t comment on any of the things that my colleagues say. 

Mr. CASTEN. I understand, but you understand the concern that 

if markets and regulators are to understand that the Fed has a 

consistent policy, and one of the members of the Fed is saying 

something that appears to be directly opposed to Fed policy from 

6 months earlier, that is a concern. 

Mr. POWELL. Again, Governors have always had the ability, and 

Reserve Bank Presidents as well, the ability to have their own 

views on things. And that is going to happen, and that is probably 

a good thing that we have a diversity of perspectives. I think there 

may be less than that difference than you suggest. Again, what I 

am saying is, to the extent we have a role, it is to ensure that 

banks understand and can manage the risks that they do face from 

climate change. 

Mr. CASTEN. Okay. I don’t want to create internal tension, but 

I think we are all aware that you, above anyone, is aware that your 

words are closely scrutinized, and we were concerned with the 

words of your colleagues there. 

Madam Chairwoman, I would like to introduce for the record a 

working paper from the European Central Bank entitled, ‘‘The Impact of Global Warming on Inflation.’’ 

I don’t know if you saw this report that just came out recently, 

but it says, among other things, that climate change poses risks to 

price stability by having an upward effect on inflation, both food 

prices and headline inflation. And what I wonder is, without opining on their math, if, in fact, we are looking at a world where climate change for the European Central Bank is going to increase 

inflation, and were we to find ourselves in that world going forward, would the Fed or other central regulators say we have the 

tools to address this, or we are going to say, well, that is non-core 

inflation? What are we going to do in hindsight, because it feels to 

me like we have a major bank regulator saying climate change is 
49 

running the risk of inflation? But I don’t even know what tool you 

would use to address that. 

Mr. POWELL. What I can just say is that for now, this doesn’t 

enter my thinking in any way that we would, in the near term, 

change our inflation goal because of climate change or the need to 

deal with it. There is a lot of thinking and research that over a 

long period of time, really, the process of investing very large 

amounts of money in a green transition could drive inflation up, 

but that is not something we are thinking about today. During our 

FOMC meetings, we are not thinking about climate change as 

something that is relevant to current inflation or to current monetary policy. 

Mr. CASTEN. Sure. 

Mr. POWELL. And our focus today is inflation. 

Mr. CASTEN. I guess what I am struggling with is that if we 

agree that this is a systemic risk, if we agree that this leads to inflation, and we don’t really know what role you would have with 

tools, there is a concern there. 

The last thing I want to end with is, in April of 2023, in the report on SVB, one of the lessons that was noted in the Fed review 

said that this is an opportunity for regulators and bank managers 

to be more willing to adopt a precautionary perspective and that 

the Fed must strengthen its supervision based on what we have 

learned. I am trying to figure out with climate change, if we agree 

that this is a forward risk, how do we get the Fed the tools to apply 

a precautionary perspective? 

Mr. BARR. [presiding]. The gentleman’s time has expired. Chairman Powell can submit an answer in writing for the record. 

And I now recognize myself for 5 minutes. Chairman Powell, in 

March, you confirmed to me that the Federal Reserve is a consensus organization built on garnering broad support before agreeing to any proposal. And given the breadth and scope of the potential changes to the capital framework that is under review right 

now, that consensus-driven approach seems to be all the more important. I am concerned that the Vice Chair for Supervision has 

seemingly been given far too much latitude to act unilaterally, especially in light of Section 1107(a)(1) of the Dodd-Frank Act, which 

provides the Vice Chair for Supervision authority only to develop 

recommendations for the Board and oversee supervision and regulation. 

Can you speak to the process that is underway? Is the Vice Chair 

acting unilaterally, or is that a wrong characterization? And if so, 

if it is just a recommendation, can you walk us through the steps 

that the Board will take from recommendation to a vote? 

Mr. POWELL. Sure. I think what you see is very much the way 

the statute works, which is the Vice Chair for Supervision has the 

responsibility, the obligation to develop regulatory proposals for the 

Board that will be considered by the full Board. As I mentioned before in another context, he is not the Comptroller of the Currency. 

He brings proposals to the Board, and the Board votes by majority 

vote to support them or not, which is how that works. In terms of 

provision—— 

Mr. BARR. Is he including other members of the Board currently? 
50 

Mr. POWELL. I think all of us have been getting briefings on 

what is developed, but ultimately, the job is to present something 

to the Board for consideration by the Board. 

Mr. BARR. Once he presents his recommendations, how long will 

there be debate/deliberation, and is that transparent to the public? 

Mr. POWELL. There will be a meeting—it could be a virtual meeting—this summer to vote on these things. In the meantime, there 

is a lot of conversation going back and forth now, and we are sort 

of in that process now, but things are still moving around. 

Mr. BARR. Our concern, Mr. Chairman, is that it seems like right 

now, the Vice Chair is writing personalized assessments of bank 

failures and results of new Fed climate scenario experiments without a whole lot of collaboration with other Governors. And given 

that this new scheme could raise capital requirements by as much 

as 20 percent, in an already well-capitalized banking system, and 

that the cost of such changes could be $100 billion or more in lost 

GDP, I am concerned with your testimony that this would only be 

a virtual vote. Shouldn’t this be a more transparent public Board 

meeting and a deliberative process that includes all members of the 

Board? 

Mr. POWELL. It is really just a question of calendars and where 

will people be in the summer. We haven’t decided what form the 

meeting would take, whether it would be virtual. 

Mr. BARR. Given that it is a pretty big decision, and that the law 

requires the full Board to make this decision and not one Board 

Member to act unilaterally, we would hope that the Fed would hold 

public meetings on the new proposal. Will you and the Federal Reserve Board commit also, when the proposal is voted on, to also include your economic analysis that would justify whatever capital 

changes are made in a quantitative form? 

Mr. POWELL. I don’t know that. I am not sure we will have exactly what you are looking for. But we will create a public record 

that supports the proposal, whatever it turns out to be, and the 

votes will be what they are, and it will be subject to public comment and analysis, no doubt. 

Mr. BARR. Well, in order for the notice-and-comment period to be 

meaningful, I think market participants will need to understand, 

on a quantitative basis, what the justification is for additional capital requirements if, in fact, that is what the proposal is, given the 

fact that we already have a very well-capitalized system. I don’t 

have much time left, but will you also commit to proposing appropriately-tailored regulatory requirements based on the complexity 

and size of the financial institution? 

Mr. POWELL. I will commit to supporting that. I can’t commit to 

what the final product will be, what the vote will be. But as I mentioned at the outset, I do think we benefit hugely from a very diverse banking system, and I wouldn’t want to do anything to jeopardize that. 

Mr. BARR. Finally, earlier this week, the Wall Street Journal 

published an article that stated that, unlike your predecessors, you 

have not focused on fiscal responsibility. Would you like to correct 

the record regarding that? 

Mr. POWELL. I would. Thank you very much. It was just an oped, but it was factually incorrect. There are countless times that— 
51 

and you have heard me do this—I have said the same thing that 

my predecessors have said, which is that the United States’ Federal budget is on an unsustainable path, which means that the 

debt is growing faster than the economy. And that we are going to 

need to fix this, and sooner is better than later. 

Mr. BARR. The time has expired. Thank you. And the gentleman 

from New Jersey, Mr. Gottheimer, is now recognized. 

Mr. GOTTHEIMER. Thank you, Mr. Chairman. And thank you for 

being here today, Chairman Powell. I am particularly concerned 

that the current regulatory environment disadvantages small and 

regional banks. Specifically, with First Republic receivership, I am 

concerned that the largest banks were given preference in the bidding process, thereby enabling the larger banks to grow even bigger. My understanding is that certain regional banks were unable 

to bid on First Republic because of an extensive and time-consuming vetting process put in place by regulators that put them at 

a disadvantage in the bidding process. 

Mr. Chairman, are you aware of a regulatory-mandated, pre-approval process that banks must complete to bid on firms going into 

receivership? And is there a notification process for informing 

banks that they can go through this process, because I am concerned that some who wanted to bid were unable to do so. 

Mr. POWELL. This is entirely something within the jurisdiction of 

the FDIC. We play an important role here, but when it comes down 

to selling a closed institution, that is just something the FDIC does, 

according to our own procedures. To my knowledge, there were a 

bunch of regional banks involved in bidding for First Republic. 

Mr. GOTTHEIMER. Do you know of any where they said they could 

not participate, or was your understanding that anybody could participate? 

Mr. POWELL. I am not aware of any. That is the heart of what 

they do. They have the law. They have the people who have the 

experience and everything. 

Mr. GOTTHEIMER. Thank you. Small and medium banks are a 

large portion, as you know, of our country’s commercial real estate 

loans. The Federal Reserve’s May financial stability report said 

that the higher interest rates may be increasing the risk that commercial borrowers are not able to refinance their loans, and that 

a correction in property values could lead to losses by banks that 

hold commercial real estate debt. I am particularly concerned that 

such a correction threatens the stability of lenders and thousands 

of jobs in my district in Northern New Jersey. How is the Fed looking at this and helping small, medium, and regional banks manage 

their portfolios or think about the risks of commercial real estate 

loans, and what guidance is being provided to banks, given that 

nearly $1.4 trillion in commercial mortgages are set to mature in 

the next 2 years? 

Mr. POWELL. We are following it very, very closely, and I think 

you have put your finger on it, this is a problem more for smaller 

banks, and not for all smaller banks, but it is the banks that have 

high concentrations. There will be losses, particularly in the office 

and some of the mall sectors. And what we can do is, there is a 

supervisory playbook, so the supervisors are in there, and they are 

working with the company to help it preserve capital and do the 
52 

right things to get through what may be a difficult time for some 

banks that have a high concentration. 

Mr. GOTTHEIMER. Thank you so much. As we have discussed 

today, there are concerns obviously that the banks may be tightening their lending processes and tightening what is available. Are 

you concerned that higher rates and the recent instability in the 

banking system will lead to a credit crunch that can make it harder for small businesses to finance their operations, and potentially 

lead to rolling blackouts of loan defaults across industries? 

Mr. POWELL. We are watching that very carefully. Bank credit 

conditions have been tightening for a year, and that is partly as a 

result of our rate increases. We are very alert to the possibility 

that the sort of shocks that happened in March might exacerbate 

that. We don’t see a lot of evidence yet on that, but we wouldn’t 

have expected to. So, it is something we are going to continue to 

monitor carefully. 

Mr. GOTTHEIMER. Are you concerned at all about the nonbanks 

and the crunch that could happen on that side? 

Mr. POWELL. Yes, the banks are obviously highly regulated and 

have capital and that kind of thing, and some of the non-bank lenders are in a very different place. But we don’t regulate and supervise them, and so it is something we are watching. 

Mr. GOTTHEIMER. How do you think we as a Congress should be 

looking at the nonbanks? Are there any recommendations? 

Mr. POWELL. Where there is same activity, there really ought to 

be same regulation. You shouldn’t be able to conduct the same activity. We regulate these things for a reason, and if we are not regulating them appropriately, then that should be changed. But if 

you can just go across the street and start a business that does the 

same thing without the regulation, then that is not going to be effective or fair. 

Mr. GOTTHEIMER. With Basel III conversations up and running, 

and obviously driving towards some conclusions or recommendations, is that something that you have been watching? Obviously, 

you have Fed representation there. What are your biggest concerns 

in terms of requirements, and how you are thinking through that 

right now? 

Mr. POWELL. I think these are going to be very important. A 

number of very important proposals are coming, and I would just 

put out a couple of principles. And that is, our banks are strong, 

and they are well-capitalized. I think that is pretty broadly agreed 

upon, and I think we are going to want to understand how even 

higher capital is justified. There will need to be a case made for 

that. 

Almost as important as that or maybe more important is that we 

need to respect the diversity of institutions that we have in this 

country. And we benefit from having banks of all different shapes 

and sizes, and we don’t want to push regulation or capital, for that 

matter, to a place where only the biggest banks have a viable banking model. We are a long way from it. I just think we need to keep 

that in mind. 

Mr. GOTTHEIMER. Or be disadvantaged compared to our foreign 

banks? 

Mr. POWELL. Yes. Thanks. 
53 

Mr. GOTTHEIMER. Okay. Thank you so much. I yield back. 

Mr. POWELL. Thank you. 

Mr. GOTTHEIMER. Thanks. 

Chairman MCHENRY. Chairman Powell, we have two more Members here, but unfortunately, you have a hard stop at 1:00. Can we 

go over just by 5 minutes? Is that okay? Okay. No good deed goes 

unpunished. So, we will go to Mr. Davidson from Ohio for 5 minutes, and Ms. Garcia from Texas for 5 minutes, and then we will 

wrap up. Thanks. 

Mr. DAVIDSON. Thank you, Mr. Chairman. Chairman Powell, 

thank you. Thanks for the extra time so we get all these questions 

in. And just picking up where my colleague, Mr. Gottheimer, left 

off talking about nonbanks and banks and kind of the regulatory 

framework, you recently published online the list of master accounts that the Fed has. Are any of those master account holders, 

non-FDIC-insured entities? 

Mr. POWELL. Are any of them? I don’t know. 

Mr. DAVIDSON. Could you get that answer back to us, please? 

Mr. POWELL. Sure. 

Mr. DAVIDSON. Okay. Thanks. 

When I think about some of the dynamics that are going on in 

the market related to banks, nonbanks, securities, not securities, 

one agency in particular has been very active in this space over at 

the SEC, and it is kind of tangentially related to the Fed. But 

crypto and digital assets in the U.S. has a market cap of around 

$1.1 trillion right now. It has been there for a bit. Do you acknowledge that this asset class has staying power in the U.S. economy? 

Mr. POWELL. It appears to have some staying power. Of course, that $1.1 trillion was—what was that, a year ago—a lot higher. 

Mr. DAVIDSON. Yes, it has had some volatility, in large measure 

due to the lack of legal clarity. So hopefully, this committee will 

help that quite a lot here this summer, with at least two bills, one 

on stablecoins and one on market structure. And it will be clear, 

not just for Congress, but for regulators, including Chairman 

Gensler and obviously, market participants, whether they are forming the ideas or investing in the ideas or participating in the activities in the space. 

But when I think about participating in activities, one of the core 

functions that has taken place for a while now is the reverse repo 

market. It has hovered just over $2 trillion for the first half of this 

year, and it follows kind of exponential growth that we have seen 

over the past few years. What is your assessment on the implications that the reverse repo market has on our economy? 

Mr. POWELL. Not much. It is just a place that holds money on 

the Fed’s balance sheet. It is like a mutual fund. In fact, it is, as 

the Treasury has been issuing bills to refill the Treasury General 

Account, we have actually seen the Overnight Reverse Repo Facility declining. 

Mr. DAVIDSON. Isn’t there some sort of conflict with higher reserve requirements, liquidity and lending in the market, or is there 

any tension there? 

Mr. POWELL. I don’t believe so. It is just a place for where, largely, money market funds have been putting their money. And as 

rates normalize in the economy, we are likely to see the Reverse 
54 

Repo Facility shrink dramatically, and I think without particularly 

important macroeconomic effects. 

Mr. DAVIDSON. When you think about the implications, the Fed 

had to intervene in September of 2019 to provide stability and liquidity to that market. The fact that the Fed needed to use an 

emergency facility to intervene in the market would normally indicate some cause for alarm. Do you feel like that was an aberration, 

and there is no more cause for alarm, that everything has been settled? 

Mr. POWELL. That was about suddenly finding ourselves in reserve scarcity. We had been monitoring the level of reserves really 

carefully, and thinking that we knew where scarcity would start to 

appear, and the problem is that demand can be very volatile. So, 

demand spiked and there weren’t enough reserves, so you had a 

situation where we had to supply reserves in big quantities. The 

Reverse Repo Facility was at zero for a very long time, and I think 

it is shrinking. Now, we don’t know how much it will shrink. 

Mr. DAVIDSON. I think the growth of it kind of highlights some 

of the related concerns for inflation and tension between liquidity, 

and, frankly, when you look at the requirements for capital, in the 

alternative, returns in the market, there is concern that all that 

capital can’t be deployed in the same place. When you have to pick 

places for it to be deployed, then it certainly has implications. I 

would love to follow up with you on that, and maybe align my own 

views with the thinking at the Fed and with some market participants. 

When I think about the Federal Reserve, of course, I think about 

monetary policy. And we want Fed autonomy on monetary policy 

to some extent, a lot of non-market intervention that, to me, continues to be a cause for concern, continued purchases of mortgagebacked securities, for example, prevent real price discovery. Is Fed 

purchasing propping up prices, or is it holding them artificially 

low? It is a non-market influence, and I think it has some distortions. As Chair of our Housing and Insurance Subcommittee, I continue to be concerned about that, but the other thing is really the 

big concerns of the regulatory side. 

Chairman MCHENRY. The gentleman’s time has expired. 

Mr. DAVIDSON. I yield back. 

Chairman MCHENRY. We will now recognize Ms. Garcia for the 

ultimate questions of the day. 

Ms. GARCIA. Thank you, Mr. Chairman, and thank you, Chairman Powell, for being here today. It is always a breath of fresh air 

to have you here to give us the latest report from the Fed. 

I first want to thank you personally for working on a topic that 

has always been near and dear to my heart, and near and dear to 

the heart of the Congressional Hispanic Caucus. I know several 

Members have already touched a little bit on issues related to diversity and inclusion, and you, yourself, said something, and I really was struck by the words you used, that when you look at setting 

the interest rate, you want to reflect all Americans in the room 

when you do it. And in my view, the best way to do that is to make 

sure that the people at the table making those interest rates decisions reflect what America looks like. 
55 

Last month, joining you was Adriana Kugler, who was nominated as the first Hispanic to ever serve on the Federal Reserve 

Board of Governors in its 109-year history. It took a while, but we 

are there now. And hopefully, that will help ensure that when decisions are being made, all Americans are indeed in the room with 

you. So, I want to thank you and the President both for making 

sure that that happens. I know that in my district that is 77-percent Latino, we are really proud of that fact. 

But, Mr. Chairman, I wanted to see if you could provide me an 

update on the Federal workforce, particularly within the Fed System, because I think in that area, and you may recall we have discussed it before in prior times that you have been here, the workforce doesn’t quite look like America. Could you give me an update 

on where you are at with diversity and inclusion issues related to 

Latinos in the Federal workforce for the Fed? 

Mr. POWELL. Sure. I guess the place I would start is a good part 

of the story, which is with the Directors of the 12 Reserve Banks 

around the country; that is an area where we have focused heavily 

on diversity and inclusion, and I think met with a great deal of 

success, with relatively high numbers. We would be happy to get 

you the numbers. Relatively high numbers of both Hispanics and 

African Americans and other minorities, and women, so that has 

been an area where we have a free hand to act and we can do that. 

I think in terms of the workforce, we actually had a particular 

focus at the Federal Reserve Board on Hispanics and working hard, 

particularly devoting ourselves to a tight focus on generating more 

Hispanic contact and more Hispanic employees, and I think we had 

some success with that. And it is very important. It is not a coincidence that the most successful organizations in American society 

have seemed, to me, to be the ones that have pretty advanced diversity and inclusion programs, so that they do have all different 

parts of America represented around the table. 

Ms. GARCIA. Great. Another area of concern for me has always 

been affordable housing. I know that this is a challenge for us in 

Houston, and also the challenge of combating the homelessness crisis across America. I know that this morning, Ranking Member 

Waters filed some bills related to seeking increased monies, dollars 

for affordable housing and dollars for tackling the homelessness 

problem. Do these issues impact the inflation rate and the work 

that you are doing to lower the cost of housing for all Americans? 

Mr. POWELL. I think it may have a marginal effect on inflation. 

I would point to things like workforce participation; people need 

housing so that they can get to the places where the jobs are. And 

in many metropolitan areas, the rents are very high, so people are 

having to drive very long routes to get to work. And labor force participation has an important effect on labor supply, which has an effect indirectly on inflation as well. 

Ms. GARCIA. How long have we had the 2-percent goal for inflation rate? 

Mr. POWELL. Unofficially, for a quarter of a century, and officially, since 2012, and other central banks—— 

Ms. GARCIA. What factors would have to occur for you to reconsider the 2 percent, since it is been there for so long? 

Mr. POWELL. What would have to happen for us to reconsider it? 
56 

Ms. GARCIA. Yes. 

Mr. POWELL. I can’t really think of anything. Nothing during my 

tenure will happen to cause me to want to reconsider it. If you 

come back in 100 years, it will probably be different, but it is some 

unforeseen circumstance, I would say. 

Ms. GARCIA. Thank you. 

Chairman MCHENRY. The gentlelady’s time has expired. 

Ms. GARCIA. Thank you, Mr. Chairman. I appreciate it. 

Chairman MCHENRY. I would like to thank Chair Powell for his 

testimony today. 

The Chair notes that some Members may have additional questions for this witness, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to this witness 

and to place his responses in the record. Also, without objection, 

Members will have 5 legislative days to submit extraneous materials to the Chair for inclusion in the record. 

Chair Powell, I ask you and your team to please respond no later 

than July 30, 2023. 

And with that, this hearing is adjourned. 

Mr. POWELL. Thank you. 

[Whereupon, at 1:08 p.m., the hearing was adjourned.] 
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