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Federal Reserve latest: Powell testifies and governing board nominees are reviewed

MARY LOUISE KELLY, HOST:

The Federal Reserve opted not to raise interest rates last week. That does not mean the fight against inflation is over. Fed chairman Jerome Powell told lawmakers today more rate hikes are likely this year as the central bank tries to get prices under control. Powell was also asked about recent turmoil in the banking system and about his fondness for jam band rock.

NPR's Scott Horsley was listening. And, Scott, I guess we should start with the serious stuff...

(LAUGHTER)

KELLY: ...Which was, as we noted, that when the Fed met last week, they voted unanimously to hold interest rates steady. Sounds like that might be temporary. What's going on?

SCOTT HORSLEY, BYLINE: Yeah, the Fed has raised rates really aggressively over the last 15 months, partly because, at first, it was playing catch-up with what was runaway inflation. Now it's close to caught up. So Powell told lawmakers the Fed can afford to move more slowly.

(SOUNDBITE OF ARCHIVED RECORDING)

JEROME POWELL: Much as you might do if you were to be driving 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.

HORSLEY: But Powell made clear he does not think we're at the destination yet. In fact, 16 out of 18 members of the Fed's rate-setting committee said last week they think interest rates will have to go higher. Most think we'll have at least two more quarter-point rate hikes before the end of the year.

KELLY: The problem is that rate hikes have contributed to some of the recent stresses in the banking system. What did Powell have to say about that?

HORSLEY: Yeah, Powell says the overall banking system remains sound despite several high-profile bank failures. He did say the Fed is keeping a close eye on the commercial real estate market, which is under pressure as fewer people are going into office buildings to work, for example. Powell says that could be challenging for some smaller banks that have a lot of loans concentrated in that sector.

(SOUNDBITE OF ARCHIVED RECORDING)

POWELL: There will be losses in - particularly in the office and some of the mall sectors. So the supervisors are in, they're - and they're working with the company to help it preserve capital and do the right things to get through what may be a difficult time for some banks that have a high concentration.

HORSLEY: The Fed is also weighing more stringent regulation and supervision of banks in response to those failures. That got some pushback, though, today, especially from Republicans on the committee who worry that it could depress bank lending and maybe stifle economic growth.

KELLY: Meanwhile, Scott, I understand Powell could soon have a new colleague on the Fed board. What can you tell us about her?

HORSLEY: Yeah, her name is Adriana Kugler. President Biden tapped her to fill a vacancy on the Fed's Board of Governors, and she appeared this morning before a Senate confirmation hearing. Kugler is an economist who previously served in the labor department. Right now, she's at the World Bank. And her nomination is getting some extra attention because she would be the first Latino or Latina to serve on the Fed board. She's a first-generation American and spent part of her childhood in Colombia.

(SOUNDBITE OF ARCHIVED RECORDING)

ADRIANA KUGLER: I am fortunate to have lived the American dream after having seen poverty and adversity. I have had educational and economic opportunities that my parents and grandparents would have never had. And I have benefited from social mobility that is only possible in our dynamic U.S. economy.

HORSLEY: And Kugler's nomination was cheered today by New Jersey Senator Robert Menendez, whose complained for years about the lack of Latino representation on the board.

KELLY: OK. Now to the rock...

HORSLEY: (Laughter).

KELLY: ...And Powell's apparent fondness for it. We don't usually get a concert review when the Fed chair testifies. We did today. What happened?

HORSLEY: Yeah, #EconTwitter lit up earlier this month when Jake Sherman of Punchbowl News circulated a picture of Jerome Powell at a Dead & Company concert outside Washington. That prompted a headline in Barron's to ask, is the Fed head a Deadhead?

KELLY: (Laughter).

HORSLEY: So Congressman Wiley Nickel of North Carolina decided to find out.

(SOUNDBITE OF ARCHIVED RECORDING)

WILEY NICKEL: How was the show? Did you like it?

POWELL: Oh, it was terrific. What can I say? So...

(LAUGHTER)

POWELL: It was great. I've been a Grateful Dead fan for 50 years.

HORSLEY: And by the way, Mary Louise, according to the latest inflation yardstick, the price of concert tickets fell by 0.3 of a percent last month, but they're still up year over year. So it could be a long, strange trip back to musical price stability.

KELLY: (Laughter) Well said. Thank you, Scott.

HORSLEY: You're welcome.

KELLY: NPR's Scott Horsley.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.