Fed Chair Powell's semi-annual testimony has concluded
Fed Chair Powell's semi-annual testimony has concluded. He didn't retrench from yesterday's comments which supported market expectations for a rate cut at the upcoming July 30, 31. While a 25 bp easing is fully priced in, there are still questions whether this will be a one-and-done, or the beginning of a string of moves that will unwind some of last year's hikes. There's only small chance for a 50 bp easing at the end of the month given the stronger than expected CPI and the strength in the labor market. The dovish dissenter Bullard also sees no need for aggressive action. Nevertheless, Powell did suggest some potential for firmer action when he said it's important not to let inflation fall too far below the 2% level, citing Japan as an example. Yesterday he stressed the Fed needs to make a stand here and support the 2% target. In the prepared text there were worries that weak inflation would be even more persistent than the Fed anticipated.