Fed: Powell struck a confident and committed tone - Westpac

Turning to the US, new FOMC Chair Jerome Powell’s first Congressional testimony was the focus for markets this week and in his first appearance, before the House of Representatives Committee, he struck a confident and committed tone, points out Elliot Clarke, Research Analyst at Westpac.

Key Quotes

“Emphasising that since the December FOMC meeting, the economy had strengthened on the back of tax and spending initiatives from the government and given continued gains for employment and confidence. The market debate quickly turned to whether the next set of forecasts from the Committee would point to four rather than three rate hikes in 2018. However, a subsequent repeat performance before the Senate carried a more cautious tone on wages and inflation, and this saw market pricing revert to where it began the week – President Trump’s trade announcement was also a contributor. It is very clearly the case that US interest rates are on the way up.”

“Debate over the timing and the overall scale of the increase will continue through 2018; how the market reacts to each rise holds great significance. We continue to expect three hikes this year and another two in 2019, but see the risks skewed to the upside.”