Fed Powell Testimony Reiterates Patience on Rate Hikes, USD Muted
USDPrice Analysis and Talking Points:
- Fed Powell Reiterates Patience on Rate Guidance Despite Solid Growth
- Muted reaction in USD Following Statement
- Fed Minutes Review
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Fed Powell Reiterates Patience on Rate Guidance Despite Solid Growth
The USD saw somewhat of a tepid reaction following Fed Chair Powell’s testimony in which he reiterated that patience with regard to rate hikes remain appropriate despite seeing solid US growth. Chair Powell also noted that the Fed are currently evaluating an appropriate timing and approach for ending the balance sheet run-off, likely to be announced in the upcoming meetings. As a reminder, in the January minutes, Fed officials emphasized that the unwinding of the balance sheet should come to an end this year. Overall, with this being relatively in line with recent Fed rhetoric, little light has been shed in the way of fresh policy signals.
Markets Continue to Signal an End to Fed Hiking Cycle
Fed fund futures continue to suggest that the Federal Reserve will be on hold for the remainder of the year with the next move likely to be a cut by Q1 2020. In our view, we see this as too dovish with the potential for 1 more rate hike in 2019.
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