The market is waiting for Jerome Powell’s speech that will take place next Wednesday amid the growing expectation of the decision that the central banks (of Europe and the US) will take on March 22.
The market is expectant before the speech of Jerome Powell which will take place next Wednesday amid the growing expectation of the decision that the central banks (of Europe and the US) will take on March 22.
The general consensus of analysts is a 25 basis point increase in the interest rate. “We will be aware of how far the US central bank is going to raise its official interest rates, that is, what will the terminal rate be – now the market expects it to be in the range between 5.25% and 5.50%, a hypothesis with which we are quite in agreement-”, they assure in Link Securities.
“In principle, we do not expect Powell to deviate from this scenario when he addresses both chambers, although we will have to be very attentive to what he says about the recent behavior of inflation and how he expects this variable to behave in the future. It will also be relevant to know, once again, your opinion on the state of the US labor market, which is much more stressed than expected at this point after the strong rises in official rates, since a tense labor market has important connotations inflationists”, stand out in Link Securities.
“We expect him to keep his talk about the need for additional rate hikes to control inflation and the need for these hikes to remain data-dependent.”
diversity of opinions
A hawkish tone from Powell, who will testify before a Senate panel on Tuesday and a House committee on Wednesday, likely it will provoke a reaction from liberals who are warning the Fed not to inflict undue pain on the job market. That has been a bright spot for President Joe Biden as he prepares for a tough re-election fight in 2024 and Democrats try to defend a slim majority in the Senate.
Republican lawmakers, meanwhile, can applaud the Fed’s actions because they keep the focus on persistent inflation keeping Biden’s approval ratings low. The Republican Party took control of the House of Representatives in the November legislative elections, although also with a slim majority.
For the Fed, achieving long-term employment strength requires inflation to return to the 2% target set by the Central Bank, from the current 5.4%.