Interest Rates, Inflation, and What Else Could Come Up in Powell's Speech
Federal Reserve Chair Jerome Powell takes the stage again on Friday. His remarks will be worth watching to see if he strikes a dovish tone like he did at last week’s monetary policy meeting or takes a more hawkish stance.
The discussion, which takes place shortly after the release of the Fed’s preferred inflation gauge Friday morning, should cover a number of topics. Expect Ryssdal to push Powell on the timing of rate cuts and how long Fed officials will tolerate stronger inflation, especially if Friday’s data matches other recent hotter-than-expected reports.
Economists surveyed by FactSet expect February’s headline personal consumption expenditures price index to trend up from January. But core PCE, which excludes the more volatile food and energy prices and is the data the Fed most closely watches, is projected to show signs of cooling.
At the press conference following the March meeting of the Federal Open Market Committee, Powell seemed to look past recent hot inflation readings, noting that officials were still on track to cut rates this year.
The timing of those anticipated cuts remains unclear. Markets have shifted their expectations for cuts to begin the second half of this year. The odds of a May rate cut have fallen dramatically, with futures now leaning more toward the Fed’s first cut arriving in June or July.
Speaking at the Economic Club of New York on Thursday, Fed Gov. Christopher Waller indicated that the recent spate of hotter inflation data raised the burden of proof needed to start implementing rate cuts. If stronger inflation persists, Waller said it could “reduce the overall number of rate cuts or push them further into the future.”
“Adding this new data to what we saw earlier in the year reinforces my view that there is no rush to cut the policy rate,” Waller said. “Indeed, it tells me that it is prudent to hold this rate at its current restrictive stance perhaps for longer than previously thought to help keep inflation on a sustainable trajectory toward 2%.”
Now it’s Powell’s turn at bat to make his case.