Welcome to Investopedia's economics live blog, where we explain what the day's news says about the state of the U.S. economy and how that's likely to affect your finances. Here we compile data releases, economic reports, quotes from expert sources and anything else that helps explain economic issues and why they matter to you.
Today, Federal Reserve Chair Jerome Powell testified before the Senate and small business optimism grew for a third month.
Yellen Sees Inflation Falling
Inflation is likely to keep moving lower, though it may take a while for housing costs to come in line, Treasury Secretary Janet Yellen told the House Financial Services Committee today.
In a wide-ranging testimony, Yellen addressed the U.S. economy, telling lawmakers that the inflation spike in 2022 was mainly the result of global supply chain issues that affected economies around the world. She said she expected inflation to continue to move lower from the 2.6% rate shown in the most recent Personal Consumption Expenditure (PCE) report.
“Many of those supply issues are now fully resolved, so much of the pressure has diminished,” Yellen told the House Financial Services Committee.
However, Yellen said that rents and housing costs were likely to remain at elevated levels. Housing affordability is at some of its lowest levels since 2007.
“It could be a while for housing costs to come down to a more normal level,” Yellen said.
-Terry Lane
Small Business Optimism Improves, Remains Below Historical Average
Small businesses' optimism hit its highest point of the year, despite signals that inflationary pressures could persist.
The NFIB Small Business Optimism Index reached its highest level of the year in June, increasing one point to 91.5. However, it extended a streak of readings below the historical average to two and a half years.
“Main Street remains pessimistic about the economy for the balance of the year,” said NFIB Chief Economist Bill Dunkelberg.
Inflation remained a top concern for small business owners, though a smaller share than in the month prior cited it as the most important issue. Fewer business owners pointed to problems with labor quality in June, but more cited costs of labor, poor sales, and government regulations as top concerns.
The report also showed that price pressures could continue, with the net percentage of business owners raising their selling prices in June moving higher to 27%. Meanwhile, a net percentage of 38% of businesses reported raising compensation for employees, which could also help continue inflationary pressures, the report said.
-Terry Lane
Federal Reserve Chair Jerome Powell Will Speak to the Senate Today
Federal Reserve Chair Jerome Powell will appear before the Senate Banking Committee on Tuesday to deliver the Fed’s twice-yearly report on monetary policy.
The report was released last week and echoed recent comments from Fed officials in various public appearances. It noted the balancing act that the central bank’s policy committee faces as it attempts to control inflation. If the Fed gets monetary policy wrong, it could stoke inflation or cause a recession, which would be painful for everyday households.
Policymakers have kept the influential fed funds rate at a 23-year high, making mortgages, auto loans and other debt costlier in an attempt to discourage borrowing and spending. Fed officials are hoping those rates will push inflation down to a 2% annual rate from its current level of just under 3%.
Higher rates put more pressure on inflation by dragging down the economy. The risk of the strategy is that the economy could slow down too much and fall into a recession complete with mass layoffs—an outcome that’s so far been avoided, to the surprise of many economists.
Read more about what to expect from Powell here.