Federal Reserve Chair Jerome Powell is testifying before the Senate on Capitol Hill on Tuesday, addressing the central bank's outlook on inflation, the economy, interest rates, and more. Claudia Sahm, founder of Sahm Consulting and former Federal Reserve Board Economist, joins Market Domination to analyze the economic landscape.

Sahm begins by highlighting that inflation has come down and emphasizing that this progress "is going to be the reason when the Federal Reserve begins to cut interest rates." She commends Powell's testimony skills, describing it as his "strength," and notes his clarity in conveying that the labor market has cooled and that "inflation risks are not coming out of the labor market."

Reflecting on the current economic environment, Sahm observes, "We are balancing risks in a place that frankly was unimaginable a year ago," adding, "It was supposed to take a recession to make this kind of progress." She told Yahoo Finance, "For this cycle, it's been so unusual to really look at how we are in the healing process. Getting back to something that looks like normal is really important."

Addressing the Sahm Rule, her recession indicator, she explains it "is trying to get at what's the threshold for that increase [in the unemployment rate] that happens right inside a recession." Sahm notes that the economy "is getting close to that threshold."

"These increases in the unemployment rate clearly are getting to a place that is consistent with recessions we've seen previously... since 1950. So we don't want to discount it," Sahm states.

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This post was written by Angel Smith