Today and tomorrow, US Fed Chairman Jerome Powell will give his semi-annual testimony to Congress. Much attention is being paid to today’s Senate Banking Committee, which is to be held first. There are many points to check, such as perceptions of inflationary trends, thoughts on the extent of interest rate hikes, and prospects for terminal rate levels.
As for inflation trends, headline inflation is clearly on a downward trend, but it is likely to be pointed out that the strong upward pressure on wages due to the pull in the labor market is causing secondary inflation to persist. After that, it will be its strength and weakness.
Regarding the extent of the interest rate hike, it is expected that the rate will be raised at a steady pace of 25bp. The point will be whether or not new content will come out.
The outlook for the terminal rate level is an issue related to the analysis of fundamentals such as inflation trends. Levels well above 5% have been suggested by hawkish members. It will be interesting to see if Chairman Powell mentions a specific level.
However, all that can be said in general is that this weekend’s US employment statistics and next week’s US consumer price index are just ahead of the Congressional testimony. There is also a view that it is difficult for Chairman Powell to present a new outlook, as market sentiment will change significantly depending on the results of these two indicators. In any case, I would like to check whether there will be any surprise remarks from Chairman Powell. It is scheduled to start at midnight on the 8th in Japan time.
There will be no change in the major flow of US dollar buying, but it is assumed that this remark may lead to a stronger flow. Pay attention to Fed Chair Powell’s remarks.
