US inflation is well above target and the labor market remains very tight, the US central bank recently published Monetary Policy a congressional report read before Chairman Jerome Powell’s testimony from Capitol Hill next week, according to Reuters.

Key things

“Reducing inflation will likely require a period of below-trend growth, some softening of labor market conditions.”

“Financial conditions have tightened further since January.”

“Some indicators future business failures are somewhat elevated.”

“Several major foreign central banks continued to tighten but also emphasized the need to be cautious given delays and uncertainty.”

“Core services inflation outside of housing shows no sign of easing.”

“The slowdown in inflation may depend in part on further easing of the tight labor market.”

“The outlook for the funds rate is subject to considerable uncertainty.”

“They will adjust the pace of balance sheet contraction if needed.”

“The credit conditions of the banks have tightened further since March.”

“The upheavals in the banking system in March have reportedly left their mark on bank lending conditions, especially for medium-sized and small banks.”

Market reaction

The US dollar index it is clinging to a slight recovery near 102.40 after this news.

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