The bottom line for Chair Jerome Powell’s prepared remarks is that a rate cut is on the horizon, and likely at the upcoming July 30-31 meeting. The main points seem to be:
- The re-emergence “greater uncertainty” on trade and “heightened concerns over trade developments” from business and agriculture contacts points.
- Weakness in global economy that “will continue to affect the US economy”.
- A drop in business confidence that “may have started to show through to incoming data”.
- “Muted inflation pressures” that are persisting, at least in the near term.
- A strong labor market that still needs to see firmer wage growth.
Altogether, this points to a greater probability that the FOMC will opt for a so-called “insurance cut” in short-term rates.
Neither in the prepared remarks or later in the Q&A in his 10:00 ET appearance before the House Financial Services Committee will Powell outright promise a rate cut. Expect reiteration of previous assertions that monetary policy is not on a preset course and that no decision is made before the actual meeting. However, the tone of his responses will lift confidence that one is on the way.
With anticipation of lower rates established, it will allow the Q&A to shift toward other topics like balance sheet policy, fiscal policy, the value of the US dollar, Federal Reserve independence, supervision and regulation, and nominations for the Board of Governors. For many and most of these questions Powell will only be able to answer in general terms, citing the apolitical position of the Fed and that he can only respond specifically where it is directly the responsibility of the central bank.
Disclaimer: Whetstone Analysis provides commentary as a service to its subscribers. Whetstone Analysis is not responsible for, and expressly disclaims all liability for, damages of any kind arising out of use, reference to, or reliance on any information contained within the site. While the information contained within the site is periodically updated and every effort is made to ensure its accuracy, no guarantee is given that the information provided in this Web site is correct, complete, and up-to-date. Click here to read our full Disclaimer.