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Here Are the Key Points From Fed Chairman Powell’s Testimony

Here Are the Key Points From Fed Chairman Powell’s Testimony

Dylan Jusino, Contributor

- Federal Reserve Chairman makes his first appearance before congress commenting on the Fed’s balance sheet, the strength of the economy, but not a potential rate hike next month

- DXY breaks through 90.00 resistance level and holds onto gains

- See the DailyFX Economic Calendar for upcoming economic data and for a schedule of live coverage see the DailyFX Webinar Calendar

Released 13:30 GMT: Fed Chairman Powell’s Notable Comments

This morning has brought much volatility with a slew of economic data out of the U.S. Additionally, markets have been closely watching Federal Reserve Chairman Jerome Powell’s first appearance before congress. Prior the Chairman’s testimony he released his semiannual monetary report to congress. Here are his most noteworthy comments:

  • “Together, Chair Yellen and I have worked to ensure a smooth leadership transition and provide for continuity in monetary policy.”
  • “Wages have continued to grow moderately, with a modest acceleration in some measures, although the extent of the pickup likely has been damped in part by the weak pace of productivity growth in recent years.”
  • “Economic activity abroad also has been solid in recent quarters, and the associated strengthening in the demand for U.S. exports has provided considerable support to our manufacturing industry.”
  • “After easing substantially during 2017, financial conditions in the United States have reversed some of that easing. At this point, we do not see these developments as weighing heavily on the outlook for economic activity, the labor market, and inflation. Indeed, the economic outlook remains strong.”
  • “In this environment, we anticipate that inflation on a 12-month basis will move up this year and stabilize around the FOMC's 2 percent objective over the medium term. Wages should increase at a faster pace as well. The Committee views the near-term risks to the economic outlook as roughly balanced but will continue to monitor inflation developments closely.”
  • “In the FOMC's view, further gradual increases in the federal funds rate will best promote attainment of both of our objectives. As always, the path of monetary policy will depend on the economic outlook as informed by incoming data.”

Beginning 15:30 GMT: Powell Testifies Before Congress

Following the Chairman’s statement he testimony before congress he made no comment on the Federal Open Market Committee’s (FOMC) upcoming March meeting. His words exactly, “I don’t want to prejudge the March FOMC projections” did not add nor take away from the liklihood of an interest rate hike next month. Powell defended the Fed’s post-crisis policies including the more recent decision to unwind the balance sheet. He also reiterated that the data since the FOMC’s December meeting suggests the economy is strengthening as fiscal policy becomes more stimulative. He outright rejected the idea of changing the Fed’s unwinding plan. The Chairman was also careful not to comment on fiscal policy’s and more specifically the impact of last year’s tax cuts on productivity and wage growth. Although, he suggested that, “corporate tax cuts in theory should boost investment and increased capital expenditure should lead to higher productivity” (and in turn higher wages). When asked about the national debt, Powell cautioned that “it is very important that the [US] government stays on a sustainable fiscal path” and that “the debt ceiling should always be raised in a timely fashion.”

Chart 1: DXY 15-minute Chart (February 21- 27, 2018)

Leading up to Jerome Powell’s testimony, DXY had been on a clear uptrend as markets anticipated his comments. Prior to the release of the Fed Chairman’s statement, DXY broke through the recent 90.00 resistance level. And throughout Powell’s testimony the US Dollar Index managed to sustain that rally. At the time that this was written DXY traded at 90.33

--- Written by Dylan Jusino, DailyFX Research

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.