- We expect it will be appropriate to raise interest rates in March;
- impact of Russian invasion on Ukraine on US economy highly uncertain
- making appropriate monetary policy in this environment must recognize that the economy evolves in unexpected ways
- Fed will need to be nimble in responding to incoming data and evolving outlook
- we will begin to reduce balance sheet after process of interest rates as begun
- balance sheet reduction will proceed in predictable manner, primarily through adjustments to reinvestments
- supply disruptions have been larger and longer lasting than anticipating
- Fed continues to expect inflation to decline over the course of this year as supply issues ease and demand moderates
- Fed is attentive to risk of more upward pressures on inflation expectations and inflation from a number of factors
- Fed will uses policy tools to prevent higher inflation becoming entrenched, promote a sustainable expansion, strong labor market
- labor market is extremely tight, wages rising at fastest pace in many years
- US economic slow down from omicron variant appears to have been brief
Fed's testimony and answer question session will begin at 10 AM ET
The comments here don't project a path of rates (whether it's 25 or 50 basis points to launch the tightenings, although expectations are largely in the 25 basis point camp). I would suspect that he would take a measured approach (25 basis points) with an eye on the data. He the alludes to that with his hedging in his comments. The Russian Ukraine conflict is sending inflation even higher with commodities including oil, wheat, corn, soybeans rising sharply but it could also put a brake on the economies/demand as well.
The US two year yield has risen slightly to a session high of 1.43%. That is still up rather sharply from the 1.275% low for the day
The 10 year yield is up to 1.782% up 6.3 basis points. The low for the day was 1.70%.
The Fed funds futures are implying five hikes this year which is a little higher than yesterday, but not by much.
We are expected to hear from Feds Bullard before the Powell testimony at 10 AM. He has expressed that he would like to see the 100 basis points by July 1 implying a 50 basis point hike along the way to launch. The expectations for a 50 basis point rise in March is steady at about 5%.
The USDJPY has moved to a new session high of 115.424 (currently trades at 115.40). The price is moving away from its 100 hour moving average at 115.226
Premarket gains are pulling back in US stocks.
- Dow +97 point
- NASDAQ +32 points
- S&P +11 point