Fed Chair Appears Before House To Deliver Monetary Policy Report
Federal Reserve Chairman Jerome Powell presented the Monetary Policy Report and responded to questions before the House Financial Services Committee on Wednesday. Powell will appear before the Senate Banking Committee in the second day of his semi-annual testimony at 15:00 GMT on Thursday.
Powell told the House on Wednesday that incoming data will determine when they will start reducing the policy rate and repeated that they would like to have greater confidence inflation will move sustainably toward 2% before taking action. Commenting on the economic outlook, Powell noted that there was no reason to think the economy was "in or facing a significant near-term risk of recession."
The benchmark 10-year US Treasury bond yield declined to 4.1% in the American session on Wednesday and the US Dollar (USD) suffered large losses against its major rivals. According to the CME FedWatch Tool, markets are currently pricing in a nearly 90% probability of a rate cut in June.
US Dollar price this week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.44% | -0.59% | -0.30% | -0.87% | -1.39% | -0.70% | -0.19% | |
| EUR | 0.44% | -0.15% | 0.14% | -0.43% | -0.94% | -0.28% | 0.26% | |
| GBP | 0.59% | 0.16% | 0.27% | -0.28% | -0.79% | -0.11% | 0.41% | |
| CAD | 0.30% | -0.12% | -0.29% | -0.56% | -1.09% | -0.42% | 0.12% | |
| AUD | 0.87% | 0.43% | 0.28% | 0.57% | -0.50% | 0.15% | 0.67% | |
| JPY | 1.37% | 0.91% | 0.72% | 1.06% | 0.46% | 0.63% | 1.17% | |
| NZD | 0.72% | 0.28% | 0.12% | 0.42% | -0.16% | -0.66% | 0.53% | |
| CHF | 0.19% | -0.25% | -0.41% | -0.12% | -0.69% | -1.21% | -0.52% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Main takeaways from Powell's Q&A session in the US House
"Rate cuts will depend on path of the economy."
"Incoming data will determine when rate cuts begin."
"We would like to have more confidence on inflation; we have some confidence but want more."
"Let's see a little bit more data so we can become confident."
"Strength of economy and labor market means we can approach that carefully, thoughtfully."
"Pandemic may have changed in a sustained way how we target inflation."
"We are seeing continued solid growth, which should continue."
"No reason to think the economy is in or faces significant near-term risk of recession."
"I don't think possibility of recession is elevated right now."
"So far we have economy growing at solid pace, labor market still tight and strong."
"Inflation has come down sharply."
"These are very attractive conditions we want to continue."
"I think we can achieve a soft landing."
"We are using our tools to keep a strong labor market and strong growth while making progress on inflation."
"We are on a good path so far in being able to get there."
"We are making sure banks with commercial real estate sector exposure can manage any losses."
"This fallout will last over next several years."
"Our Fed supervisors are engaged with small and medium-sized banks on their exposure risks."
"Immigration and labor force participation both contributed to strong economic growth we had last year."
"Silicon Valley Bank's failure was due to a too-concentrated funding structure."
"We are not climate change policymakers."
"We are starting very carefully with large institutions on their climate exposure; not for imposing it on small banks."
"Compensation incentives were not a main driver of Silicon Valley Bank's failure."
"Climate change is real and poses risks over the longer term."
Highlights from Powell's prepared statement
"It will likely be appropriate to begin dialing back policy restraint at some point this year."
"Policy rate likely at its peak for this cycle."
"The Economic outlook is uncertain; ongoing progress to 2% inflation is not assured."
"We will carefully assess incoming data, evolving outlook, balance of risks."
"Risks to both cutting rates too early and too fast as well as too late or too little."
"The labor market remains relatively tight."
"Fed’s restrictive stance is putting downward pressure on economic activity and inflation."
"Labor demand still exceeds supply; nominal wage growth has been easing."
"Risks to achieving dual goals moving into better balance."
"While inflation is still above 2%, it has eased substantially."
"The economy has made considerable progress over past year on dual mandate."
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