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Federal Reserve Chairman Jerome Powell will deliver a public talk on the job market at an event hosted by the Brookings Institution in Washington at 2:30 Taiwan time on Thursday. The public talk is likely to solidify expectations that the Fed will slow the pace of rate hikes in December (by 50 basis points), while Powell is likely to point out that the Fed’s battle with inflation will continue into 2023.
After the Fed raised interest rates by 75 basis points four times in a row, Powell’s public speech may respond to market expectations on whether the Fed will raise the benchmark interest rate by 50 basis points or more in December. But with the current U.S. inflation rate still well above the inflation target of maintaining 2%, Powell is likely to emphasize in any statement on interest rates that interest rates may rise further next year.
In anticipation of Powell’s public speaking, Julia Coronado, founding partner at Macro Policy Perspectives, said: “Powell could be more assertive in this speech about maintaining a hawkish monetary policy and could point to scope for labor market imbalances.” Coronado said Powell may describe the U.S. non-farm payrolls data as the main reason why the Fed needs to stick to monetary tightening for a long time.
According to futures market contract pricing, market investors expect the Federal Reserve to slow down the pace of raising interest rates next month, and expect interest rates to rise from the current 3.75-4.00% to a peak of around 5% next year.
The market’s expectations are in line with Powell’s remarks after the Fed meeting earlier this month, when he said that the Fed may slow down the pace of raising interest rates next month, even if future interest rates will eventually rise to a higher peak level.
“I don’t think there’s a lot of heavy lifting for the market and the Fed to see inflation in line with,” said Michael Feroli, chief U.S. economist at JPMorgan.
Another economist said that “in the end, Powell will lead the final decision on interest rate policy, reminding the market whether the Fed will turn dovish and continue to tighten policy until there is definite evidence that inflation is continuing to decline.”
The minutes of the Fed meeting in November showed that the vast majority of Fed officials agreed to slow down the pace of future rate hikes. But the view is unclear about how high rates will eventually need to be raised, with policymakers seeing the need to raise rates higher than expected.
According to the final value of interest rate expectations released after the meeting, the market currency interest rate will reach 4.4% by the end of this year and 4.6% by the end of next year. These forecasts will be updated at next month’s meeting.
Ahead of Powell’s public remarks, the U.S. will release updated data from the Nonfarm Job Openings and Labor Turnover Survey (JOLTS) on Wednesday night, a report Powell often cites as evidence of labor shortages. Social wage pressures in the US will also intensify due to an unexpected increase in non-farm job vacancies in the market in September.
Immediately after Powell’s public remarks, the November non-farm payrolls report will also be released on Friday night, and policymakers will also review the report ahead of the December interest rate decision, as well as the inflation data November PCE on Thursday night. Price Index.
Stephen Stanley, chief economist at Amherst Pierpont Securities LLC, said: “Since the Fed’s November meeting, financial market conditions have eased, stocks have risen, and risk spreads in the bond market are tightening.” The Fed will raise interest rates in December to the 5% level that Powell previously signaled, so I think Powell has done his job of signaling the market.”
But Powell is unlikely to mention stock market-related information in his remarks. Instead, there is a high probability that he will reiterate his remarks earlier this month: “The Fed may soon slow down the pace of raising interest rates, but rates may need to be slightly higher. Prices can only cool down if they are lower than previous expectations.”
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