Jerome Powell, chair of the Federal Reserve, during a House Financial Services Committee hearing in Washington, D.C., on June 21, 2023.
Nathan Howard | Bloomberg | Getty Images
Federal Reserve Chairman Jerome Powell heads to Capitol Hill on Wednesday with markets intent on getting more clarity about how the central bank plans on proceeding with monetary policy this year.
The past several months have seen a changing dynamic between financial markets and the Fed over the pace and timing of expected interest rate cuts this year. Markets have had to adjust their collective view from a highly accommodative central bank to one that’s more cautious and deliberate.
With his congressionally mandated testimony coming before the House on Wednesday and the Senate on Thursday, Powell will be tasked with providing a sharper view — and not rocking the boat for a nervous Wall Street.
“The question now for the market is to glean any information on when the Fed will begin employing rate cuts and how many,” said Quincy Krosby, chief global strategist at LPL Financial. “He’s not going to answer that necessarily. But if there is any change, any nuance, that is what the market wants to see.”
Central to the question of how the Fed acts from here on out is its view on inflation and how Powell expresses that. In recent weeks, he and others have expressed satisfaction with the trend in prices along with apprehension that risks still lurk, saying it’s too early to ease up on monetary policy.
Markets currently anticipate the Fed will begin cutting in June and enact the equivalent of four quarter-percentage-point cuts in total this year, according to futures market pricing gauged by the CME Group. Policymakers in December indicated three cuts and mostly have avoided providing a timetable.
Mixed signals complicate the message
On the inflation issue, the data had been cooperating for the most part.
Inflation readings in the latter part of 2023 showed a clear trend toward the Fed’s 2% target. However,…
Read the full article here
