July 9 Macroeconomic data interpretation: Fed Chairman Powell delivers semi-annual monetary policy testimony to the Senate Banking Committee
Overall summary: Powell's speech was neutral, without a clear interest rate cut plan, emphasizing the independence of the Federal Reserve and the steady growth of the economy. Similar to my expectations yesterday, the US dollar index was slightly boosted by a balanced approach without damaging the expectations of interest rate cuts and the bullish sentiment of US stocks, while causing a sharp drop in gold prices at the same time.
Bold assumptions, careful analysis, welcome to Uncle Cat’s encrypted “channel”
The following is a detailed interpretation:
1. The job market: strong but not overheated, and inflation slowing but not reaching the 2% target.
2. Factors for interest rate cuts: More economic confidence indicators are needed. Inflation approaching 2% alone is not enough to cut interest rates.
3. Interest rate cut decision: needs to be discussed and decided at each meeting.
4. Economic balance: The Fed wants employment and inflation data to be more balanced.
5. Economic growth: Steady growth, emphasizing economic confidence, and encouraging the US dollar and US stocks.
6. Job market risk: An unexpected weakening of the job market could prompt interest rate cuts or intervention.
7. Inflation target: Emphasizes the inflation target of close to 2%. A worsening unemployment rate or a single inflation data will not prompt a rate cut.
8. Independence of the Federal Reserve: It responded to Senate inquiries with neither servility nor overbearance, demonstrating its independence.
9. Economic risks: the dual risks of economic overheating and recession.
10. Supply and demand relationship: Inflation lies in the imbalance between supply and demand and the weak manufacturing industry.
11. Real estate risk: Commercial real estate risk needs to be considered by banks.
12. Immigration issue: Immigration poses a threat to short-term inflation, but has a neutral impact in the long term.
13. Wage growth: Although high, it is falling.
14. Impact of immigration on the economy: Immigration should promote economic growth and reduce inflation rather than tighten the labor market.
15. Future monetary policy: No monetary policy adjustments are expected at this meeting.
Market reaction: The market’s reaction to Powell’s speech was relatively flat, and we need to pay attention to the impact of subsequent data on risk markets.
Summary: Powell's speech remained neutral, boosting the dollar and US stocks, but did not change the expectation of rate cuts, emphasizing the independence of the Federal Reserve and economic balance. The market's expectation of a 25 basis point rate cut in 2024 remains, and the probability of a rate cut in September is 70%. It is expected that there will not be much change in the speech in the House of Representatives tomorrow, and the focus will be on Thursday's CPI data. At present, unless there is a small probability event that CPI drops significantly, it will not be able to ignite the bullish sentiment in the market, and it is probably difficult to support the reversal of the market.
#Fed rate cut expectations#Powellspeech
