Key takeout
- FEDE supports the stubcoin regulatory framework to protect consumers, as Chairman Jerome Powell said.
- Powell emphasized the need to balance innovation and protection of financial stability.
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The Fed supports establishing a stubcoin regulatory framework to protect consumers, Chairman Jerome Powell said in testimony to the Senate Banking Committee.
During the hearing, Powell also acknowledged the unintended consequences of regulations on the crypto industry, underscoring the need to reevaluate de-canking.
He said he will work with committee chair Tim Scott to ease unfair regulatory burdens and explore changes to ensure fair treatment of crypto companies. The issue of defiling crypto companies is underscored as lawmakers continue to investigate what it means.
Regarding the Fed's approach to monetary policy, Powell said there is no urgency to cut interest rates given the strong US economy and continued efforts to achieve its 2% inflation target.
According to Powell, the US economy grew 2.5% in 2024, driven by robust consumer spending. The labor market is resilient, with monthly salary increases averaged 189,000 over the past four months and unemployment rates of 4% in January.
Inflation has declined considerably over the past two years, but has exceeded its target. Core personal consumption expenditure prices rose 2.8% over the 12 months since December, and total PCE prices rose 2.6%, excluding food and energy costs.
“We know that suppressing policies too quickly or too much can hinder inflation progress,” Powell said. “At the same time, reducing policy restraints can unfairly weaken economic activity and employment.”
The Fed has maintained interest rates from 5.25% to 5.5% since July and has been undergoing aggressive hikes to combat inflation. According to Powell, future policy adjustments will depend on incoming data, evolving prospects and risk balance.
This is a developing story.
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