02:31 PM EST, 03/06/2024 (MT Newswires) -- Fed Chair Jerome Powell (voter) said in prepared testimony that it would "likely" be appropriate to cut interest rates this year if the economy evolves as expected but cautioned that risks remain and that the Federal Open Market Committee does not expect it would be time to lower rates until there is greater confidence that the inflation is slowing "sustainably" toward the 2% goal.

In the question-and-answer session, Powell went on to say that the Fed will act "carefully and thoughtfully" when considering interest rates, a luxury that the FOMC has due to the strength of the economy and the labor market, adding that a soft landing is attainable. Powell indicated that no final decisions have been made regarding the controversial Basel III endgame bank capitalization proposals but conceded that large changes are likely from the preliminary proposals.

San Francisco Fed President Mary Daly (voter) said the FOMC is prepared to do its job to bringing down inflation, Reuters reported. Daly said the FOMC has limited tools to impact housing affordability, a source of inflation that Powell was questioned on frequently in this testimony.

The Fed's Beige Book showed slight growth in the US economy since early-January, with hiring up slightly to modestly, but with some easing in labor market tightness. Likewise, price pressures remain, pushing consumers to focus on necessities rather than discretionary purchases.

Recent comments of note:

(March 4) Atlanta Fed President Raphael Bostic (voter) said that the unusual combination of inflation and solid economic growth gives the FOMC time to consider its policy moves, noting that the risks of acting too quickly vs not quickly enough to loosen policy, but emphasizing that he would not be comfortable with lowering rates until he is certain that inflation is consistently slowing.

(March 1) Fed Governor Adriana Kugler (voter) suggested that a soft landing is possible, with slower inflation and no major impact on the labor market.

(March 1) Fed Governor Christopher Waller (voter) said that he would like to see the Fed's holdings of mortgage-backed securities fall to zero and for its holdings of Treasury securities to shift toward shorter-dated securities to better align with the Fed's policy rate.

(March 1) Dallas Fed President Lorie Logan (nonvoter) said that it will be "appropriate" at some point to slow the pace of balance sheet runoff when holdings reach a certain level but did not specify what level that is or when the timing will be right.

(March 1) The Federal Reserve board released its semi-annual report to Congress, which recapped the Fed's actions over the last year to bring down inflation and said that the pace of price appreciation has slowed but remains above target. As usual, the report contains little new information, turning the focus to Fed Chairman Jerome Powell's testimony Wednesday and Thursday.

(March 1) Richmond Fed President Tom Barkin (voter) said in an interview on CNBC that he is in no hurry to cut rates, repeating that the data will be the driver of the FOMC's decisions.