What can markets expect from Powell’s semiannual testimony?

Fed Chair Jerome Powell is expected to reiterate his stance that interest rate cuts are not necessary right now, particularly in light of recent inflation-linked data that indicated price pressures are still persisting.

The Fed will release its Beige Book poll, which is a nationwide study of regional business contacts, on Wednesday. Additional information on the January trade balance, job opportunities, and results from independent polls conducted in February among purchasing managers at service providers will be released in the upcoming week.

Powell is anticipated to keep up a hawkish posture during his semiannual testimony before Congress, letting the markets know that the Fed is not pressing to lower interest rates. It will maintain the pressure on the economy and increase the likelihood of further delayed effects from monetary policy if it results in tighter financial conditions.”

Powell is on his way to Capitol Hill where, on Wednesday, he will testify before a House committee on monetary policy, and on Thursday he will testify before a Senate panel. In light of the US economy’s underlying resilience, the head of the US central bank and almost all of his colleagues have stated in recent weeks that they can afford to exercise patience when determining when to lower interest rates.

In an interview with CBS’s 60 Minutes on February 5, Powell stated that the “danger of moving too soon is that the job’s not quite done, and that the really good readings we’ve had for the last six months somehow turn out not to be a true indicator of where inflation’s heading.”

Data in recent weeks has confirmed that taking a conservative approach paid off, as inflation increased last month. Democrats, however, are likely to be unsatisfied because they are concerned about how the trajectory of rates may impact races lower on the ballot and the presidential election in November.

They anticipate questioning the head of the Fed about why, in light of their significant progress against inflation, policymakers are maintaining such high borrowing costs and running the danger of harming the economy.

The monthly jobs report on Friday will be this week’s data highlight. According to economists, payroll growth slowed to 200,000 in February after reaching a record-breaking 353,000 in January. The unemployment rate is expected to remain at 3.7%, while hourly earnings growth is likely to have slowed.