MNI: Fed's Powell Sees Jobs Progress; Still 'Long Way To Go'

Federal Reserve Chairman Jerome Powell will tell lawmakers Tuesday the economy is not yet ready for the central bank to begin paring back its USD120 billion QE program but the job market is making some headway in the strongest year for growth in decades.

"Conditions in the labor market have continued to improve, but there is still a long way to go," Powell said in prepared remarks for two days of hearing in Congress, echoing the message of the Fed's latest Monetary Policy Report.

"While reaching the standard of 'substantial further progress' is still a ways off, participants expect that progress will continue," he added. "We will continue these discussions in coming meetings.We will provide advance notice before announcing any decision to make changes to our purchases."

The remarks come against the backdrop of an improving economy and a slate of inflation readings that have surpassed expectations and raised some concern the central bank may be behind the curve.

The consumer price index jumped 5.4% in June, though surging car prices fueled a substantial portion of the rise. That concentration gives many if not all Fed officials confidence the inflation spike is transitory.

"Inflation has increased notably and will likely remain elevated in coming months before moderating," Powell said.

The chairman will likely face questions from lawmakers on both the employment and price stability questions of the Fed's mandate, and may get pressed about a red-hot housing market that is pricing out many buyers.

"Household spending is rising at an especially rapid pace, boosted by strong fiscal support, accommodative financial conditions, and the reopening of the economy," he said. "Housing demand remains very strong, and overall business investment is increasing at a solid pace."