In a testimony before congressional lawmakers on Wednesday, Federal Reserve Chair Jerome Powell indicated that the central bank is not in a hurry to cut interest rates, which could mean more challenges for Americans already grappling with rising borrowing costs over the past two years. Powell stated that it is unlikely for there to be any rate hikes this year, suggesting that the current policy rate is likely at its peak for this tightening cycle. However, he also mentioned that rate cuts remain on the table if the economy cooperates.

During his testimony before the House Financial Services Committee, Powell provided an optimistic assessment of the health of the US economy and its future prospects. Responding to a question from Representative Al Green, Powell stated that growth is expected to continue at a solid pace throughout the year. This sentiment aligns with the projections by economists and Fed officials, who forecast a healthy 1.4% annualized rate of growth for this year based on their December projections.

Powell emphasized that there is currently no evidence to suggest that the US economy is at risk of falling into a recession. While he acknowledged the possibility of a downturn, he stated that it is not currently elevated. The fourth quarter of 2021 saw robust economic growth, with a 3.2% annualized rate and strong consumer spending, albeit slightly lower compared to the third quarter's impressive 4.9%. The Atlanta Fed is projecting a healthy 2.1% annualized rate of growth for the first quarter of this year.

Furthermore, Powell addressed concerns about the potential risks posed by empty office buildings and declining property values. He acknowledged that this presents challenges, particularly for banks that have provided loans to landlords facing reduced rents or losses from property sales. Powell assured lawmakers that the Fed is monitoring banks with significant exposure to commercial real estate and has been working with them to manage the situation. He acknowledged the possibility of some banks experiencing losses as a result.

In regards to banking regulations, Powell faced scrutiny from Republican lawmakers regarding the proposed Basel Endgame III regulations. This set of regulations would require major and medium-sized banks to hold more capital, potentially affecting lending capabilities and potentially raising interest rates on loans. The Fed chief assured lawmakers that the Fed is carefully reviewing the comments submitted on the proposal and anticipates a version that will appeal to a broad consensus of stakeholders.

Overall, Powell's testimony provided insights into the Fed's stance on interest rates, confidence in the economy's future trajectory, and ongoing efforts to monitor potential risks in the banking sector. As the year progresses, all eyes will be on economic data and Fed announcements to gauge whether rate cuts will come into play and how the US economy continues to evolve.