In view of analysts at ING, Fed Chairman Powell’s first day of the two days long testimony in front of the US Congress could sound of imminent easing – or alternatively, the threat of rates on hold and will be keenly watched by the markets.
“There isn’t a lot today that could impinge on the argument for or against easing, though I’d be tempted to take a close look at the small firm US NFIB survey.”
“But even if this data stays robust or even strengthens, I think the “worry-ists” about the Fed are misinterpreting what Powell has been hinting at doing. Powell is offering to provide an “insurance cut”, or maybe two.”
“Powell need not think the economy is heading into recession to deliver 25bp or even eventually 50bp of insurance easing, but he believes that easing in this way will keep the US economy on its current growth path.”
“Therefore, it makes no sense for Powell to wait until September to provide such insurance, as this is not a data dependent decision, but a risk-management one. By September, there may be other arguments for some easing. But as Powell says, an “…ounce of prevention is worth more than a pound of cure…”, or something like that anyway. I might also add, “A stitch in time saves nine”, though that may just be too esoteric.”