MNI: Fed's Powell to Testify Growth Strong Despite Headwinds

The U.S. economy and labor market are making steady progress despite concerns related to the pandemic that have slowed the recovery's pace, Federal Reserve Chair Jerome Powell will tell Congress Tuesday.

"Since we last met, the economy has continued to strengthen," Powell said in prepared testimony before the U.S. Senate Banking Committee. "Real gross domestic product rose at a robust pace in the first half of the year, and growth is widely expected to continue at a strong pace in the second half."

Powell did not directly address the outlook for monetary policy, nor did he discuss a recent controversy over stock market trades linked to regional Fed presidents, two of whom announced their retirement on Monday. The Chair said the rise in Covid cases has slowed the recovery's pace, but added labor market conditions are still improving.

"Factors related to the pandemic, such as caregiving needs and ongoing fears of the virus, appear to be weighing on employment growth," Powell said. "These factors should diminish with progress on containing the virus."

Powell said the official 5.2% jobless rate in August understates the shortfall in employment because labor force participation has not yet recovered much ground.

On inflation, Powell reiterated most of the pressure is related to temporary pressures from supply bottlenecks but that "if sustained higher inflation were to become a serious concern, we would certainly respond and use our tools to ensure that inflation runs at levels that are consistent with our goal."