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MUFG Research discusses its expectations for Fed Powell speech on Wednesday.
- "The main event risks in the week ahead include a keynote speech from Fed Chair Powell on Wednesday when he is scheduled to discuss the economic outlook and labour market.
- We are expecting Chair Powell to deliver a hawkish policy message similar to following the last FOMC meeting when he downplayed the importance of slowing the pace of rate hikes and warned that rates are likely to have to rise to a higher peak than previously planned. Another pushback against the premature easing of financial conditions appears likely given that upside inflation risks remain a concern and financial conditions have continued to ease since the last FOMC meeting," MUFG notes.
- "Tough talk from Chair Powell could offer some much-needed support for the US dollar although as we have seen recently market participants have been willing to look through the risk of even higher US rates reflecting more confidence that US inflation has peaked and growth is slowing down more notably," MUFG adds.
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There were slightly mixed messages from the talking Fed heads today:
- Fed's Williams sees signs of moderating inflation and supply chain improvements
- Fed's Williams: Inflation risks are still on the upside
- Fed's Bullard: Markets are under-pricing the risk the FOMC might be more aggressive
USD rocked it back up: