A Change Is Gonna Come
Sounds like a rate cut is on the way.
Federal Reserve Chair Jerome Powell will finish up two days of testimony on Capitol Hill today.For my money the Wednesday session will score much higher on the unintentional comedy factor than the Tuesday session.
The US Senate takes itself a little too seriously, the US House of Representatives not at all seriously enough.
Maybe it’s because Senators face voters only every six years and Representatives are basically constantly campaigning for their two-year terms.
Senators talked a lot about relatively arcane but really important things like capital ratios for big banks.
Representatives will get us knee-deep in all kinds of things. Powell’s turn in the House Financial Services Committee hot seat begins at 10:00 a.m. ET.
He did mention the risk of cutting too soon and re-stoking inflationary fires.
And he said once more that “more good data would strengthen our confidence that inflation is moving sustainably toward 2 percent.”
But a change has come.
You could even hear it in the absence of any partisan rancor: Democrats talked about risks of waiting too long to cut like rising unemployment and housing costs and slowing manufacturing activity and Republicans basically acquiesced by their silence.
Powell drove home the point from the perspective of his and his institution’s dual mandate.
“The latest data show that labor-market conditions have now cooled considerably from where they were two years ago – and I wouldn’t have said that until the last couple of readings,” he explained.
Claudia Sahm, the chief economist at New Century Advisors and the author of the Sahm Rule, said we know the Fed’s direction from here.
“The alarm bells aren’t sounding right now,” Sahm said, noting that the labor market has cooled considerably, “but you are certainly pointed in that direction.”
It’s not going to happen when the Federal Open Market Committee meets July 30-31.
But futures traders are now pricing in a 25-basis-point cut at the September 17-18 meeting, the last one before the November 5 presidential election.
“I’m not going to be sending any signals about the timing of future actions,” Powell said, though policy makers will make their calls “meeting by meeting.”
