Powell Faces Congress. Inflation, Debt Ceiling Are in Focus.

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Federal Reserve Chairman Jerome Powell will make his semiannual visit to Capitol Hill this week, testifying before both the Senate and the House of Representatives as the central bank battles inflation and navigates the most aggressive pace of monetary-policy tightening in decades.

Powell’s back-to-back congressional appearances Tuesday and Wednesday follow the bank’s release last week of its Monetary Policy Report, which it submits to Congress twice a year.

While the hearings are nominally focused on the path forward for monetary policy, lawmakers are likely to question Powell on a broad range of subjects, from the rate-hike path and the economic outlook to debt-ceiling matters, regulatory issues, and the idea of a central-bank digital currency.

Given current economic volatility, and concerns about a potential recession, Powell is likely to be asked by both Republicans and Democrats how the Fed will navigate its dual mandate, which requires it to balance price stability with full employment. Steven Pavlick, head of policy with Renaissance Macro, says he sees an “important debate” playing out about the two during the hearing.

“You’re going to have Republicans pushing for Powell to emphasize the price stability [side] to still get inflation down to its 2% target,” Pavlick said on his firm’s podcast on Monday. “The Democrats we see emphasizing more of the employment side of the mandate and looking to maybe politically pressure Powell to slow the pace of further increases.”

The hearings come at a pivotal time for monetary policy. The Fed raised interest rates eight times over the past year, and is on track to continue tightening policy at its next meeting in two weeks. So far, its actions have had less of an impact on inflation than most economists expected: The consumer price index is up 6.4% year-over-year, and unemployment is at a remarkably low 3.4%.

The question now is whether and when the Fed should pause its tightening efforts. Some economists and lawmakers are growing concerned that the cumulative impact of the Fed’s actions has yet to fully trickle down through the economy, and that further rate hikes could go too far, thereby causing a recession. Stopping too soon, however, could allow inflation to become more entrenched in the economy and therefore harder to bring down.

Powell is also likely to face questions about the Congressional debate over lifting the government’s debt ceiling. The U.S. reached its borrowing limit in January, meaning Congress will be forced to act to raise the country’s debt limit—a move akin to raising the spending limit on a consumer credit card—before this summer, or risk a government default.

In the past, Powell has sought to keep the Fed out of the highly political debate over the debt ceiling while warning that failing to act would carry dire economic consequences.

“There’s only one way forward here, and that is for Congress to raise the debt ceiling so that the United States government can pay all of its obligations when due,” Powell said in February, adding that “any deviations from that path would be highly risky and that no one should assume that the Fed can protect the economy from the consequences of failing to act in a timely manner.”

Powell’s testimony before the Senate Banking Committee kicks off at 10 a.m. Tuesday and will be livestreamed here. He will testify before the House Financial Services Committee at 10 a.m. Wednesday.

Write to Megan Cassella at megan.cassella@dowjones.com.