Powell Delivers Report to Congress

Powell Delivers Report to Congress

Yesterday the Chair of the Federal Reserve Jerome Powell delivered his Semi-annual Monetary Policy Report to the Congress in which he reaffirmed the central bank’s focus “on achieving its dual-mandate goals of maximum employment and stable prices for the benefit of the American people.”

Powell signalled that the Fed would continue to monitor the macro-economic environment and reiterated that the central bank was willing to both “maintain policy restraint for longer” or “ease” policy depending on these conditions.

The Chair also told Congress that the US labour market was no longer a “significant” source of inflationary pressures. While this has been expressed by policy makers for several weeks, the shift marks a departure from inflationary trends seen over the last few years in which the labour market has been considered to be one of the key sources of inflationary heat.

Such comments around the labour markets vis-à-vis inflation, follow a miss last week on nonfarm payrolls. Here, data from the Bureau of Labour Statistics indicated that 143,000 jobs had been posted in January, well below forecasts of 170,000 and far shy of the previous month’s figure of 307,000 (which had been upwardly revised). That said, given what had generally been a series of robust labour data over preceding months, Powell said that “a wide set of indicators suggests that conditions in the labour market are broadly in balance”.

Powell’s comments follow the most recent FOMC which saw the Federal Reserve meet market expectations in keeping rates unchanged, marking a pause in their loosening cycle in the wake of three recent cuts. As we looked at, subsequent rhetoric from Powell telegraphed that the Central Bank are now adopting a “wait and see” approach, indicative of how policy makers will be continuing to weigh up economic and political influences.

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Russia-Ukraine

Days after President Donald Trump told the world’s press that he has had talks with President Vladimir Putin over Ukraine, Trump's defence secretary has flown to Brussels today to meet with NATO counterparts to discuss the conflict.

Trump has long said that he has a plan to end the conflict, without ever providing anything substantive and he has been unwilling to indicate how many times he has spoken with Putin on the issue.?

Earlier this week, he told reporters, “Let’s get these meetings going” […] “They want to meet. Every day people are dying”.

Zelenskyy has reiterated that continued US support of Ukraine’s defence is of the utmost importance, and he will be keen to try to win over Trump support, who has long criticised Washington’s policies towards Ukraine.

Against the backdrop of Putin and Trump reportedly having calls behind closed doors, Zelenskyy has said that “only strong steps and pressure on Russia can stop this terror. Right now we need the unity and support of all our partners in the fight for a just end to this war."

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Looking Ahead - US CPI

Market attentions turns eagerly towards the US's main inflation indicators this morning. Releasing at 13:30 GMT, consensus data suggests CPI on a monthly and annual basis comes in at 0.3% and 2.9% respectively. CPI ex Food and Energy MoM and YoY is expected at 0.3% and 3.1% respectively.?

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