All eyes are fixed on Fed Char Jerome Powell’s Congressional testimony later today on US monetary policies.
Markets were bullish at the start of the year about the prospects of an early Fed rate cut in March, however the outlook changed quickly after a spate of data and remarks by Fed officials.
Markets now expect the earliest Fed rate cut to occur in June, and thus this week’s testimony by Powell holds great importance for the outlook of US policies and rate outlook.
US Rates
The odds for a 0.25% Federal Reserve interest rate cut currently stands at 22% in May, and 70% for June.
Investors are pricing in a total of 75 basis points of Fed interest rate cuts in 2024, down from 150 basis points in recent forecasts.
Testimony’s Timeline
Jerome Powell will start presenting his testimony today on Wednesday, and will extend into Thursday in Washington DC.
Powell’s Recent Remarks
Jerome Powell’s recent remarks were much more cautious than usual, asserting that the Fed will take steady steps in changing monetary policies.
He recently ruled out a rate cut in March as the US economy proves resilient.
He also said the Fed requires much more confidence in the slowing inflation narrative before starting to cut rates.
Analysis
Obviously, bullish remarks from Powell in his testimony will hurt the odds of early rate cuts this year and will boost the dollar.
A more bearish outlook will boost the chase of a rate cut in June and even in May, in turn hammering the greenback against major rivals.
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