At its meeting last week, the FOMC decided not to raise interest rates for the first time since March 2022, leaving the federal funds rate at a range of 5% to 5.25%.
"Given how far we've come, it may make sense to move rates higher but to do so at a more moderate pace," Mr. Powell told Committee Chairman Patrick McHenry, R-N.C., when the committee leader asked how to interpret the "posture" at the FOMC meeting.
Mr. Powell added that the Fed's interest rate hikes have slowly decreased from a high of 75 basis points, "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," he said.
Leaders of the committee expressed differing opinions on how the Fed is handling its job, as ranking member Maxine Waters, D-Calif., said that "the Federal Reserve made the right decision to pause interest rate hikes."
Meanwhile, Mr. McHenry urged the chairman to "remain committed to eliminating this stealth tax on American workers and families," referring to inflation.
Many Republicans on the committee expressed concern about the effects of raising capital requirements so that banks can ward off potential crises. In particular, some asked how small businesses might be impacted, as they often rely on bank loans.
"With capital standards it's always a trade-off," Mr. Powell said. "More capital means a more stable, more sound, more resilient banking system, but it also, at the margin, can mean a little bit less credit availability and also the price of credit can be affected," adding that "there's no perfect way to assess that balance."
Mr. Powell also said increasing capital requirements would take several years to come into full effect and would likely only impact large banks.