Jerome Powell Speech Preview: Fed Chair testimony in US Congress key to shape interest rate expectations

• Jerome Powell testimony in the US Congress will be a top-tier market moving event.
• New clues on the Federal Reserve interest rate hike path are awaited.
• US Dollar, stock markets and other asset classes could see big swings on Fed Chair words.

Jerome Powell, Chairman of the Federal Reserve System (Fed), will testify on June 21 before the House Financial Services Committee. The hearing, entitled “The Federal Reserve’s Semi-Annual Monetary Policy Report”, will start at 14:00 GMT (10:00 US Eastern Standard Time), and it will have the full attention of all financial market players. 

Jerome Powell is expected to address the main takeaways of the semi-annual Federal Reserve Monetary Policy Report, published last Friday. In that report, the Fed acknowledged that the outlook for fed funds rate is subject to considerable uncertainty, while reiterating that inflation in core services ex-housing has not shown any signs of easing. Although the Fed left its policy rate unchanged at the range of 5-5.25% following the June policy meeting as expected, the hawkish revision to the terminal projection rate in the Summary of Economic Projections suggested that policymakers see the need to for additional tightening later this year. According to the CME Group FedWatch Tool, markets are pricing in a stronger than 70% probability of a 25 bps hike in July.

Members of House will question Powell about the policy outlook and its potential impact on the economy. The banking crisis in March unveiled the negative impact of high interest rates on financing conditions and heightened fears over an economic slowdown. Uncomfortably high inflation and the strong labor market, however, should allow the US central bank to stay focused on reinstating price stability. 

About Jerome Powell (via Federalreserve.gov)

"Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028."