07 March 2023
If you are covering Jerome Powell’s testimony to US congress and the market reaction, please find below a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“As the economic data continues to paint a US economy in rude health, it has become clear that markets got somewhat ahead of themselves on talks of interest rate pauses and potential pivots to rate cuts. Jerome Powell has poured cold water on the idea that Fed is ready to change tack and reiterated the need for bigger interest rate rises if they are required.
“Indeed, data has shown that while inflation peaked at the end of last year, its downward trajectory has not been quite as swift as market participants would have liked. This sticky inflation means interest rate rises will remain on the table for as long as employment remains robust. Powell has previously stated that softening in the jobs market is required to get inflation back to its 2% target, but he will be acutely aware that he does not want to be known as the person who tipped the US into recession.
“With this testimony, there is an increased focus on Friday’s jobs data and what this may mean for the future direction of rates. Things could be about to get bumpy again in markets if the good news continues to be bad for markets.”
