All eyes will briefly fall on Fed Chairman Jerome Powell Tuesday morning when he appears before the Senate Banking Committee to deliver his comments on the Fed’s latest monetary policy report, which was released last week and confirmed that while “valuation pressures” remain high, the Fed believes inflation to be “on track” and will likely continue raising interest rates.
The hearing begins at 10 am. Watch it live below:
Most analysts expect the hearing to be a snooze fest.
KBW’s Brian Gardner said he expects questions will focus on banking regulations and trade policy, and that monetary policy will take a back seat.
“We expect much of the questioning from lawmakers will be about banking regulation and trade policy with only limited questions on monetary policy. As for his prepared remarks and comments on the economy and monetary policy, we expect that Powell will stick to his remarks from his June press conference.”
UniCredit Global Chief Economist Erik Nielsen told CNBC that Powell likely won’t deliver “a clear message on the economy” during his jaunt on Capitol Hill so that he can avoid making the same mistake he did during his first appearance as Fed chairman, when he accidentally sent markets reeling with an ill-advised comment about his dot, which prompted the market to interpret his approach to monetary policy as hawkish.
“Powell doesn’t speak in clear economic terms, for good reasons probably.”
But legislators could speak up about the long-term direction of policy as the market (the green line below) is now pricing in a rate cut in 2020.
Here are a few highlights from the monetary policy report:
- Fed says outlook for higher inflation appears to be on track
- Fed sees labor market strong, hourly pay gains moderate
- Fed: fiscal policy likely to give gdp moderate boost this year
- Fed: prime-age labor force participation may continue to rise
- Fed: drag on gdp from higher oil prices likely to be smaller
- Fed says valuations still elevated for range of assets
- Fed: vulnerabilities from leverage in financial sector look low
- Fed: commercial property valuations continue to be stretched
And the full report:
Powell’s prepared remarks are expected to be released at 10 am. We will add them below when they become available.
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Author: Tyler Durden