The S&P 500 and Nasdaq closed at record highs on Monday as investors await key inflation data to provide further clues about whether this year’s market rally is sustainable. Earnings from some major financial giants and consumer companies are also on the docket.

The broad market index ended the day up 0.1% at 5,572.85, while the Nasdaq Composite advanced 0.28% to 18,403.74. The Dow Jones Industrial Average finished 31 points lower, or 0.08%, at 39,344.79.

The S&P 500 is coming off its fourth positive week in the last five amid ongoing optimism that easing inflation — and any pockets of weakness in the economy — could lead to a Federal Reserve interest rate cut.

The June consumer price index, which will be released Thursday, could bolster those hopes if the headline number shows a slight improvement. Producer price index data will be released Friday.

Last week, labor data reflected a slightly cooling jobs market, spurring expectations of a rate cut. Although the U.S. economy added more jobs in June than anticipated, there was also an unexpected rise in the unemployment rate, to 4.1% from 4%. Traders are currently expecting two interest rate cuts in 2024, with the first in September, according to the CME FedWatch Tool.

“We believe the fundamental backdrop remains supportive for equities, driven by solid economic and earnings growth, interest rate cuts, and rising investment in AI,” UBS strategist Vincent Heaney wrote in a Monday note.

PepsiCo and Delta Air Lines are set to post results on Thursday. Then, a slew of major banks, including Citigroup and JPMorgan Chase, will kick off second-quarter earnings season on Friday.

The U.S. Federal Reserve may start cutting interest rates before year’s end. That could make future trips abroad more expensive for the nation’s travelers.

That’s due to how interest-rate policy affects the strength of the U.S. dollar.

Here’s the basic idea: An environment of rising U.S. interest rates relative to those in other nations is generally “dollar positive,” said Jonathan Petersen, senior markets economist and foreign exchange specialist at Capital Economics.

In other words, rising rates underpin a stronger U.S. dollar versus foreign currencies. Americans can buy more stuff with their money overseas.

The opposite dynamic — falling interest rates — tends to be “dollar negative,” Petersen said. A weaker dollar means Americans can buy less abroad.

Fed officials in June signaled they expect to cut rates once in 2024 and four additional times in 2025.

“Our expectation for now is the dollar will come under more pressure next year,” Petersen said.

However, that’s not necessarily a foregone conclusion. Some financial experts think the dollar’s strength may have staying power.

“There have been quite a few headlines calling for the U.S. dollar’s demise,” Richard Madigan, chief investment officer at J.P. Morgan Private Bank, wrote in a recent note. “I continue to believe the dollar remains the one-eyed man in the land of the blind.”

The Fed started raising interest rates aggressively in March 2022 to tame high pandemic-era inflation. By July 2023, the central bank had raised rates to their highest level in 23 years.

The dollar’s strength surged against that backdrop.

The Nominal Broad U.S. Dollar Index is higher than at any pre-pandemic point dating to at least 2006, when the central bank started tracking such data. The index gauges the dollar’s appreciation relative to currencies of the nation’s main trading partners such as the euro, the Canadian dollar and the Japanese yen.

For example, in July 2022, the U.S. dollar reached parity with the euro for the first time in 20 years, meaning they had a 1:1 exchange rate. (The euro has since rebounded a bit.)

In early July, the U.S. dollar hit its strongest level against the yen in 38 years.

A strong U.S. dollar gives “a discount on everything you’re purchasing while you’re abroad,” Petersen said.

“In a sense, it’s never been cheaper to go to Japan,” he added.

A record number of Americans visited Japan in April, according to the Asian nation’s tourism board. Benjamin Atwater, a communications specialist at InsideAsia Tours, a travel agency, attributes that partly to the financial incentive bestowed by a strong dollar.

In fact, he personally recently extended a work trip to Japan by a week and a half — instead of opting to travel elsewhere in Asia — largely because of the favorable exchange rate.

Everything from meals, hotels, souvenirs and the rental car were a “great value,” said Atwater, who lives in Denver and has long wanted to travel to Japan.

“It was always portrayed as one of the most expensive places you can go, [but] I was getting some of best steaks I’ve ever had for like $12,” he said.

In reality, the dynamics driving dollar fluctuations are more complex than whether the Fed raises or lowers interest rates.

The differential in U.S. rates versus other nations is what’s significant, economists said. Fed policy doesn’t exist in a vacuum: Other central banks are also simultaneously making interest-rate choices.

The European Central Bank cut interest rates in June, for example. Meanwhile, the Fed has kept rates higher for longer than many forecasters anticipated — meaning the rate differential between the U.S. and Europe has widened, helping support the dollar.

“The Fed’s on hold, other central banks are getting ready to ease and the Bank of Japan (BoJ) seems stuck in a moment,” J.P. Morgan’s Madigan wrote.

“If Japan wants the yen to stabilize, policy rates need to move higher,” he added. “That doesn’t appear to be happening anytime soon. With the ECB expected to cut ahead of the Fed, I expect current euro weakness to also prevail.”

This is happening against the backdrop of a relatively strong U.S. economy, which also generally supports a strong dollar, Petersen said. At a high level, a strong economy means there will generally be higher economic growth and/or inflation, which means a greater likelihood the Fed will keep interest rates relatively high, he said.

A strong economy also typically incentivizes foreigners to park more money in the U.S., he said.

For example, investors generally get a better return on cash when interest rates are high. If an investor in Europe or Asia were getting perhaps 1% or 2% on bank account holdings while such holdings in the U.S. were yielding 5%, that investor might shift some money to the U.S., Petersen said.

Or, an investor might want more to hold more of their portfolio in U.S. rather than European stocks if the economic growth outlook wasn’t good in Europe, he said.

In such cases, foreigners buy dollar-denominated financial assets. They’d sell their local currency and buy the dollar, a process that ultimately bids up the dollar’s strength, Petersen said.

Exchange rates “all come down to capital flows,” he said.

While these dynamics also hold true in emerging markets, currency fluctuations can be more volatile than in developed nations due to factors like political shocks and risks to commodity prices like those of oil, he added.

You’ll soon have to pay more if you want to shop at Costco.

The membership-based warehouse club said Wednesday that it will increase its membership fee by $5 in the U.S. and Canada as of Sept. 1. That’s an increase to $65 from $60 for annual memberships. Its higher-tier plan, called “Executive Membership,” will increase to $130 a year from $120.

Costco said the fee increases would affect around 52 million memberships, a little over half of which are executive memberships.

Shares rose about 2% in extended trading Wednesday.

It marks Costco’s first membership rate increase since June 2017. On average, the company has raised rates roughly every five and a half years — which would have put Costco on track to raise the fee in late 2022 or early 2023.

However, Costco held off on raising fees prior to now. In interviews with CNBC, CEO Craig Jelinek previously said it wasn’t the right time as consumers dealt with high inflation. The company’s CFO Richard Galanti made similar comments on prior earnings calls.

Costco relies on membership fees to drive most of its revenue and help keep merchandise prices low. Its rival, Walmart-owned Sam’s Club, hiked its own membership fee in 2022 for the first time in nine years. Yet even after the fee bump, a Sam’s Club membership was cheaper — at $50 for club members and $110 for members of its higher-tier level, “Plus,” on an annual basis. At BJ’s Wholesale, annual membership fees are $55 and $110, for club members and its own higher tier, respectively.

Costco said it stepped up enforcement last year to make sure shoppers weren’t using other members’ cards. It added an extra check for memberships in self-checkout aisles. The moves were reminiscent of Netflix, which has also cracked down on people who use its service without paying.

The U.S. Federal Reserve may start cutting interest rates before year’s end. That could make future trips abroad more expensive for the nation’s travelers.

That’s due to how interest-rate policy affects the strength of the U.S. dollar.

Here’s the basic idea: An environment of rising U.S. interest rates relative to those in other nations is generally “dollar positive,” said Jonathan Petersen, senior markets economist and foreign exchange specialist at Capital Economics.

In other words, rising rates underpin a stronger U.S. dollar versus foreign currencies. Americans can buy more stuff with their money overseas.

The opposite dynamic — falling interest rates — tends to be “dollar negative,” Petersen said. A weaker dollar means Americans can buy less abroad.

Fed officials in June signaled they expect to cut rates once in 2024 and four additional times in 2025.

“Our expectation for now is the dollar will come under more pressure next year,” Petersen said.

However, that’s not necessarily a foregone conclusion. Some financial experts think the dollar’s strength may have staying power.

“There have been quite a few headlines calling for the U.S. dollar’s demise,” Richard Madigan, chief investment officer at J.P. Morgan Private Bank, wrote in a recent note. “I continue to believe the dollar remains the one-eyed man in the land of the blind.”

Why the U.S. dollar gives a ‘discount’ overseas

The Fed started raising interest rates aggressively in March 2022 to tame high pandemic-era inflation. By July 2023, the central bank had raised rates to their highest level in 23 years.

The dollar’s strength surged against that backdrop.

The Nominal Broad U.S. Dollar Index is higher than at any pre-pandemic point dating to at least 2006, when the central bank started tracking such data. The index gauges the dollar’s appreciation relative to currencies of the nation’s main trading partners such as the euro, the Canadian dollar and the Japanese yen.

For example, in July 2022, the U.S. dollar reached parity with the euro for the first time in 20 years, meaning they had a 1:1 exchange rate. (The euro has since rebounded a bit.)

In early July, the U.S. dollar hit its strongest level against the yen in 38 years.

A strong U.S. dollar gives “a discount on everything you’re purchasing while you’re abroad,” Petersen said.

“In a sense, it’s never been cheaper to go to Japan,” he added.

A record number of Americans visited Japan in April, according to the Asian nation’s tourism board. Benjamin Atwater, a communications specialist at InsideAsia Tours, a travel agency, attributes that partly to the financial incentive bestowed by a strong dollar.

In fact, he personally recently extended a work trip to Japan by a week and a half — instead of opting to travel elsewhere in Asia — largely because of the favorable exchange rate.

Everything from meals, hotels, souvenirs and the rental car were a “great value,” said Atwater, who lives in Denver and has long wanted to travel to Japan.

“It was always portrayed as one of the most expensive places you can go, [but] I was getting some of best steaks I’ve ever had for like $12,” he said.

In reality, the dynamics driving dollar fluctuations are more complex than whether the Fed raises or lowers interest rates.

The differential in U.S. rates versus other nations is what’s significant, economists said. Fed policy doesn’t exist in a vacuum: Other central banks are also simultaneously making interest-rate choices.

The European Central Bank cut interest rates in June, for example. Meanwhile, the Fed has kept rates higher for longer than many forecasters anticipated — meaning the rate differential between the U.S. and Europe has widened, helping support the dollar.

“The Fed’s on hold, other central banks are getting ready to ease and the Bank of Japan (BoJ) seems stuck in a moment,” J.P. Morgan’s Madigan wrote.

“If Japan wants the yen to stabilize, policy rates need to move higher,” he added. “That doesn’t appear to be happening anytime soon. With the ECB expected to cut ahead of the Fed, I expect current euro weakness to also prevail.”

This is happening against the backdrop of a relatively strong U.S. economy, which also generally supports a strong dollar, Petersen said. At a high level, a strong economy means there will generally be higher economic growth and/or inflation, which means a greater likelihood the Fed will keep interest rates relatively high, he said.

A strong economy also typically incentivizes foreigners to park more money in the U.S., he said.

For example, investors generally get a better return on cash when interest rates are high. If an investor in Europe or Asia were getting perhaps 1% or 2% on bank account holdings while such holdings in the U.S. were yielding 5%, that investor might shift some money to the U.S., Petersen said.

Or, an investor might want more to hold more of their portfolio in U.S. rather than European stocks if the economic growth outlook wasn’t good in Europe, he said.

In such cases, foreigners buy dollar-denominated financial assets. They’d sell their local currency and buy the dollar, a process that ultimately bids up the dollar’s strength, Petersen said.

Exchange rates “all come down to capital flows,” he said.

While these dynamics also hold true in emerging markets, currency fluctuations can be more volatile than in developed nations due to factors like political shocks and risks to commodity prices like those of oil, he added.

The S&P 500 climbed Wednesday to a fresh record, breaking above 5,600 for the first time, as a sharp rise in semiconductor stocks led the market higher.

The broad market index jumped 1.02%, closing at 5,633.91, and notching a seventh straight day of gains. The Nasdaq Composite advanced 1.18%, also hitting an all-time high and ending at 18,647.45. It was the 37th record close in 2024 for the S&P 500, and the 27th for the tech-heavy Nasdaq. The Dow Jones Industrial Average added 429.39 points, or 1.09%, to close at 39,721.36.

Chip stocks were among the largest winners of the session. Taiwan Semiconductor added 3.5% after revenue from April to June came in ahead of Wall Street estimates. Peer chip firm Qualcomm ticked higher by 0.8%, and Broadcom rose about 0.7%. Artificial intelligence darling Nvidia climbed 2.7%.

Those moves come as investors await fresh inflation figures on Thursday with the release of the June consumer price index report. The data follows comments from Federal Reserve Chair Jerome Powell on Tuesday and Wednesday that has fueled investor hopes for a rate cut in the second half of the year.

“There are some things out there that look kind of frothy, but there’s no indication yet that [megacap technology] earnings can’t support those valuations,” said Scott Welch, chief investment officer at Certuity. “It’s important to remember that seven to 10 stocks constitute 30% to 40% of the S&P 500 market cap … if there’s any slippage it’s going to have an amplified effect.”

Economists polled by Dow Jones expect a 0.1% month-over-month advance and a 3.1% year-on-year gain. Core CPI, which excludes energy and food prices, is forecast to have expanded 0.2% from the prior month and 3.4% from a year earlier. The producer price index is set for release Friday.

Longtime investor Bill Gross believes Elon Musk’s Tesla is behaving like a speculative play among retail investors.

“Tesla acting like a meme stock — sagging fundamentals, straight up price action,” the former chief investment officer and co-founder of Pimco said in a post Tuesday afternoon on X. “But then there seems to be a new meme stock every other day now. Most are pump and dump.”

Tesla is on a stunning 10-day winning streak, up a whopping 43.6% since June 24. The rally was initially triggered by Tesla’s second-quarter vehicle production and deliveries numbers that beat analyst expectations.

Gross, who at one time was the most influential investor in the U.S. bond market, seems to think that the strong delivery report wasn’t enough to justify such an eye-popping run.

The 80-year-old investor also compared Tesla with Chewy, Zapp and the “old favorite” GameStop. Chewy recently gained meme status after online personality Roaring Kitty, who inspired 2021′s GameStop mania, bought a sizable stake in the pet retailer.

Gross revealed previously that he dabbled in trading GameStop and AMC options for quick profits in 2022, calling those “lottery ticket stocks.”

Shares of Tesla are still up just about 6% year to date, lagging the S&P 500, which has gained 17%.

Walmart said Wednesday that it will open five automated distribution centers for fresh food across the country, as the retailer chases efficiency and its online grocery business grows.

The discounter’s new facilities are roughly 700,000 square feet on average. Chilled and frozen areas have automation that stores and retrieves perishable items, such as strawberries and frozen chicken nuggets that are later sold at stores or added to customers’ e-commerce orders.

Walmart is the nation’s largest grocer, but it is modernizing its supply chain to keep up with customers who are increasingly picking up orders in the parking lot or getting groceries delivered to their doors. Store pickup and delivery drove the company’s 22% e-commerce gains in the U.S. in its most recent quarter.

The retailer has been automating supply chain facilities across the country, including distribution centers that handle shelf-stable items and fulfillment centers that help pack and ship online orders. Automation, along with higher-margin businesses like advertising, is a key reason why CEO Doug McMillon said in April 2023 that Walmart would grow its profits faster than sales over the next five years.

In an interview with CNBC, Dave Guggina, executive vice president of Walmart’s supply chain, said the automated facilities give the company a more precise picture of its inventory and allow it to get groceries to stores faster.

“We know what we own, in what quantity and where it is, all in near real time,” he said. “And we know that at a level of proficiency that is significantly improved than what we’ve been able to achieve with manual processes or legacy software.”

That allows Walmart to operate more cost-effectively by better predicting demand and reducing money spent on “safety stock,” extra product kept in a warehouse or back of the store to avoid running out completely, he said.

The high-tech facilities also allow more density. Each distribution center has twice the storage capacity and can process more than two times the volume of a traditional site, Guggina said.

Automation is contributing to higher spending at Walmart. The company has said its capital expenditures for the year will be 3% to 3.5% of net sales, which would translate to roughly $22 billion based on the midpoint of its guidance. The total, which includes its expansion of automation and hundreds of store remodels, is higher than the $12 billion that Walmart has historically spent on capital expenditures annually in recent years.

Walmart has said that by early 2026, about two-thirds of its stores will be serviced by some kind of automation and roughly 55% of fulfillment center volume will move through automated facilities. Unit cost averages could improve by about 20% by that time, the retailer has said.

Inside of the facilities, the automated storage and retrieval system can quickly grab the items that a store needs to restock its shelves and ferry them to an area where they’re put together into a dense pallet that’s ready to deliver to stores. Instead of relying on a worker to manually stack those items into a cube like a real-life Jenga puzzle, a robotic system helps push and stack them to put fragile items like eggs and peaches at the top.

Guggina said the automation can build customized pallets for a store that include only the specific items needed to fulfill online grocery orders. Those refrigerated or frozen products could be kept in the back of the store and used exclusively to fill those orders.

Guggina declined to say how much each facility costs to build and how that compares with traditional distribution centers for perishable items.

Walmart has already built and tested the first of the five automated distribution centers for fresh food in Shafter, California. It recently opened the second one in Lancaster, Texas, which is near Dallas. It plans to open the three others in Wellford, South Carolina; Belvidere, Illinois; and Pilesgrove, New Jersey.

Along with the new builds, Walmart is expanding four of its traditional distribution centers for fresh food to include automation. It will add about a half a million square feet to each of the facilities in Mankato, Minnesota; Mebane, North Carolina; Garrett, Indiana; and Shelbyville, Tennessee. It’s also retrofitting a legacy facility in Winter Haven, Florida.

The automation will bring changes for workers — and could reduce jobs at some facilities. Guggina said Walmart, which is the nation’s largest private employer with roughly 1.6 million workers, expects to have as many overall employees as it has now, or more, in the coming years.

But he added Walmart expects to increase productivity without hiring at the same pace as in the past. The roles it needs will change, too, he said. For example, it may need fewer people on the warehouse floor and more people to drive trucks in its fleet.

That will also be the case at the automated distribution centers for groceries, he said. Workers in the company’s traditional facilities act as “industrial athletes,” lifting hundreds of cases per hour and walking many miles each day. At the new facilities, he said, they play the part of supervisor.

Millions flock to Barcelona, Spain, every year to enjoy a sweet taste of idyllic European life. But over the weekend, thousands of people marched through the streets and sprayed visitors with water guns in outrage over mass tourism.

Protesters clapped and chanted “tourists go home!” and carried signs with anti-tourist slogans, arguing that the flood of visitors has driven up living costs for residents. 

About 2,800 people took part, according to the Guàrdia Urbana de Barcelona, the municipal police force, the Spanish paper El País reported. But members of the protest group, the Assemblea de Barris pel Decreixement Turístic, which translates to the Neighborhood Assembly for Tourist Degrowth, say as many as 20,000 joined, the paper reported.

“The tourism and hotels is the group that really makes big money, but all the people are in a very poor situation and they don’t have enough money to live. That’s the problem,” protester Joan Navarro-Bertran said. 

Barcelona is a gem in Western Europe, home to iconic sites like La Sagrada Familia — a cathedral designed by famed architect Antoni Gaudi that has been under construction for more than 100 years — sparkling blue beaches and famous local cuisine. 

Tourism is also a major part of the local economy. Last year, about 26 million people visited the Barcelona area, spending 9.6 billion euros (US$10.4 billion) in the city, according to the Tourism Observatory of Barcelona.

A great part of the agitation among residents is the increasing price of housing and the displacement of long-term residents.

Rent has risen nearly 70% over the past decade, Mayor Jaume Collboni said, the BBC reported. In June, Collboni announced a plan to stop renewing permits for rentals used by foreign visitors by 2028, a move that would make 10,000 units available to locals in four years. 

Side hustlers are hustling a little less but making more when they do.

About 36% of U.S. adults say they make extra money from a side job beyond their main source of income, according to a survey the consumer finance platform Bankrate released Wednesday. That’s down from 39% last year, when side-hustlers were earning a bit less. The average side gig now nets $891 a month, up 10% since 2023 — well ahead of inflation.

The findings add up to “a more positive view” of the side-hustle economy, said Ted Rossman, Bankrate’s senior credit card analyst. But he cautioned that “things still aren’t great.”

“About twice as many people are side hustling now versus 2017,” Rossman said, “and it’s alarming that even in a good job market so many people need a secondary source of income.” Even so, the latest survey data looks like “progress” as inflation cools, he said.

The Bankrate findings come one day before the closely watched consumer price index will deliver a fresh inflation snapshot for June, marking two years since the latest bout of price increases peaked at 9.1%. Economists expect annual inflation to have cooled to 3.1% last month from 3.3% in May, and the rate has barely budged since last summer. 

But workers’ pay has changed for the better, relative to prices.

Average hourly earnings rose 3.9% last month since the year before, federal data shows. And while the labor market is cooling down, there are still more openings than job-seekers looking to fill them after a long-feared wave of mass layoffs failed to materialize.

On Tuesday, Federal Reserve Chair Jerome Powell told lawmakers that the economy no longer looks overheated and “the labor market appears to be fully back in balance.”

A little over half of side-hustlers started gigging in 2022, when inflation was running much hotter, Bankrate found. Last year, people with side jobs were more likely to rely on them to subsidize daily living costs than to fund discretionary spending like travel or dining out (33% and 27%, respectively). But today, those shares are roughly equal (36% and 37%).

Dreon Owens, a 32-year-old who lives in Brooklyn, New York, isn’t among those easing up on side-hustling this year.

After scraping by with side projects since getting laid off during the pandemic, Owens finally landed a full-time position managing a housing nonprofit group in late 2022. But in May he took on a human resources consulting contract that he said brings in as much as $2,500 a month on top of the $100,000 annual salary from his day job.

“We’ve been beat over the head and kind of gooped into paying these extra prices when it wasn’t necessary,” Owens said, echoing concerns about so-called greedflation, in which some consumer advocates have accused corporations of hiking prices more than their own costs have risen.

“Additional income is always very helpful under this good old system of capitalism,” he said.

Consumers increasingly expect inflation to creep down further in the next 12 months, a New York Fed report found Monday. But consumer sentiment has remained tepid at best this year and many household budgets are still under stress.

After Owens’ father died last fall, he has been sending money home to help out his mother and younger siblings. But his application for a New York City housing program that helps residents find affordable rentals recently moved forward. He’s eager to leave the three-bedroom apartment he shares with two roommates, where his chunk of monthly rent comes to $1,800, but he’s also preparing to pay at least $500 more to live alone in a studio or one-bedroom.

With his freelance gig, Owens said, “I have the ability to hang with my friends, travel a little bit, go back home to see my family without having to cower in a corner thinking: Should I do this? Can I afford this? It brings about that sense of relief.”

Federal Reserve Chair Jerome Powell on Tuesday expressed concern that holding interest rates too high for too long could jeopardize economic growth.

Setting the stage for a two-day appearance on Capitol Hill this week, the central bank leader said the economy remains strong as does the labor market, despite some recent cooling. Powell cited some easing in inflation, which he said policymakers stay resolute in bringing down to their 2% goal.

“At the same time, in light of the progress made both in lowering inflation and in cooling the labor market over the past two years, elevated inflation is not the only risk we face,” he said in prepared remarks. “Reducing policy restraint too late or too little could unduly weaken economic activity and employment.”

The commentary coincides with the approaching anniversary of the last time the Federal Open Market Committee raised benchmark interest rates.

The Fed’s overnight borrowing rate currently sits in a rage of 5.25%-5.50%, the highest level in some 23 years and the product of 11 consecutive hikes after inflation hit its highest level since the early 1980s.

Markets expect the Fed to begin cutting rates in September and likely following up with another quarter percentage point reduction by the end of the year. FOMC members at their June meeting, however, indicated just one cut.

In recent days, Powell and his colleagues have indicated that inflation data has been somewhat encouraging after a surprise jump to start the year. Inflation as judged by the Fed’s preferred personal consumption expenditures price index was at 2.6% in May after peaking above 7% in June 2022.

“After a lack of progress toward our 2 percent inflation objective in the early part of this year, the most recent monthly readings have shown modest further progress,” Powell said. “More good data would strengthen our confidence that inflation is moving sustainably toward 2 percent.”

The statement is part of congressionally mandated semiannual updates on monetary policy. After delivering the remarks, Powell will face questioning from Senate Banking Committee members on Tuesday, then the House Financial Services Committee on Wednesday.

In past appearances, Powell has veered away from making dramatic policy announcements while having to dodge politically loaded questions from committee members. The questioning could get contentious this year as Washington is on edge amid a volatile presidential campaign.

Several Democratic committee members urged Powell to lower rates soon.

“I’m concerned that if the Fed waits too long to lower rates, the Fed could undo the undo the progress we’ve made on creating good paying jobs,” Sen. Sherrod Brown, D-Ohio, the committee chair, told Powell. “If unemployment trends upward, you must act immediately to protect Americans jobs. Workers have too much to lose if the Fed overshoots [its] inflation target and causes a completely unnecessary recession.”

However, Powell has stressed that the Fed is not political and does not get involved in taking policy sides outside of its own roles. In his prepared remarks, he emphasized the importance of “the operational independence that is needed” for the Fed to do its job.

His other remarks focused squarely on the stance of policy in relation to the broader economy. Recent data has shown the unemployment rate creeping higher and broad growth as measured by gross domestic product receding. Both the manufacturing and services sectors reported being in contraction during June.

But Powell said the data is showing that “the U.S. economy continues to expand at a solid pace” despite the deceleration in GDP.

“Private domestic demand remains robust, however, with slower but still-solid increases in consumer spending,” he said.