Congressional testimony from Federal Reserve Chairman Jerome Powell begins on the 6th.
He is expected to present a semi-annual report on interest rate policy when he appears before the House of Representatives on the 6th and the Senate on the 7th.
The stock market is on high alert for his remarks, as they could provide clues about the future direction of interest rate policy.
If Chairman Powell emphasizes that inflation is still high, it signals a delay in rate cuts, while highlighting a downward trend in inflation could suggest an early rate cut.
Therefore, the market is paying more attention to his testimony than ever. The semi-annual report for January comes as the consumer price index (CPI) and producer price index (PPI), which came in well above market expectations.
This report focuses on how the Federal Reserve currently assesses inflation and how Chairman Powell expresses it.
In the past few weeks, Chairman Powell and other Federal Reserve officials have been signaling to the market that it is too early to ease monetary policy despite expressing satisfaction with the inflation trend.
The current market expects the Federal Reserve to start cutting interest rates by 0.25 points as early as June, for a total of three rate cuts this year. This is a significant retreat from the six times mentioned at the beginning of the year.
His report also comes at a very sensitive time. After all three major New York Stock Exchange indices hit record highs last week, they have been underperforming this week due to uncertainty about the Federal Reserve’s rate cut.
How much Chairman Powell’s testimony reduces uncertainty will be a key point to watch.
There is also an expectation that there would be clues about how Chairman Powell will conduct interest rate policy in the face of the U.S. presidential election.
As the U.S. enters a full-fledged election campaign, the Federal Reserve cannot be free from political pressure to cut interest rates.
In particular, Senator Elizabeth Warren (D-Massachusetts) argues that high interest rates are particularly painful for low-income people and calls for a quick rate cut.
As a Senate Committee on Banking member, she is expected to directly question Chairman Powell on this issue during the semi-annual report.
How he responds to this will also be a point of interest.
sinopark@news1.kr
