Federal Reserve Chair Jerome Powell has the opportunity to boost market expectations for late July rates or cut them into talks with Congress this week.
Powell testifies to the Parliament for Financial Service Committees Wednesday and at the Senate Banking Committee Thursday, and is expected to answer questions about the economy and the Fed policy.
His testimony comes after a strong June job report raising questions about whether the Fed will actually reduce rates this month. The US economy added 224,000 jobs last month, and filling a Dow Jones estimate of 1
The report was "stronger than expected, but with an accompanying -11k in revisions, job gains were nothing to track the Fed's expected 26-day cut" Ian Lyngen, head of US rate strategies at BMO Capital Markets, wrote in a note. The Fed next decides on rates on July 31.
In the coming week, the market is also looking elsewhere for track on Fed policy, including in the Fed's minutes from its last meeting, after which it suggested it could cut rates if needed. These minutes are released Wednesday afternoon. There are also important inflation figures for consumer price indices on Thursday and producer level inflation data on Friday when PPIs are reported.
But Powell's comments on Congress's committee could clarify whether the Fed is on course to lower interest rates later this month, so widely expected.
"It is not clear to me that the data should create a screaming thing in one way or another. What it is about, is the Fed able to validate the market deafness here?" said Stephen Stanley, chief economist at Amherst Pierpoint. "The one thing that has characterized Fed communication over the last month or six weeks is that they just aren't willing to commit to something in advance."
Hope for a lowering of interest rates has sent the bonds lower and supported stocks this week. Dow Jones Industrial Average, S & P 500 and Nasdaq Composite hit all-time highs. The technology sector also rose more than 1% to a record, while the communications services sector rose more than 2%.
Economists say the markets will see a tremendous turn if Powell does not keep track of a cut in interest rates. The food futures market is pricing in a full quarter point lowering and a bit more for July.
"Personally, I do not see the matter for an ease right now," Stanley said. "Do they passively accept market judgments or push them back because they are not fully aboard with ease right now? It would be easy to change market expectations." Powell speaks next week and it would be the perfect option if they were so inclined. "
Stanley said such a move would disrupt the stock market and weaken economic conditions, which the Fed would not want to do. But neither is there a unanimous view of interest rate adjustments at the Fed either. Cleveland Fed President Loretta Mester said this week On the other hand, St. Louis Fed rejected President James Bullard at the June meeting because the Fed did not lower interest rates
Diane Swonk, Finance Manager at Grant Thornton, said a change in tone from Powell would be disturbing and unlikely. "There are other people trying to figure out what is the right thing to do right now and there is no easy answer," said Swonk. made his mind and he does not want to be on the wrong side of a recession. "
Swonk said she expects the Fed to lower interest rates by a quarter at the end of the month." All you need is uncertainty. You have, you need that inflation is low, you have it. You need wages that do not accelerate quickly. You got it, "she said." You have all these things in order. "
Some economists expect half a point, but Swonk said it would be too much since the Fed didn't really have a lot of ammunition when it fed money rate is 2.25 to 2.50%. "They want insurance but they don't want to give away the house," she said.
In addition to the Fed, investors will start thinking about the second quarter earnings season in the coming week. a big name that releases its report on Tuesday before the flood of reports from banks and others in the following week
Calendar for the coming week (times is ET)
3: 00 pm Consumer credits
Earnings : Pepsi, Levi Strauss, Helen of Troy
Earnings : Bed, bath and beyond, MSC Industrial
10:00 Fed St ol Jerome Powell at House Financial Services
10:00 am Wholesale
14:00 FOMC minutes
Earnings : Attachment, Delta Air Lines  8:30 pm CPI (June)
8:30 Jobless claims
] 10:00 Fed President Jerome Powell of the Senate Banking Committee
14:00 Federal Budget
8:30 am PPI