Jerome Powell, the Federal Reserve Chair, will testify in Washington before lawmakers this week. The central bank will review the latest inflation data, which may influence their decision on a potential rate cut. In addition to Powell’s testimony, other monetary policymakers will give speeches, pre-election pressures will be present, and new economic data will be analyzed, making for a potentially turbulent week.
During his two days of testimony, Powell will address interest rates and bank regulations with lawmakers from both parties. While the Fed has hinted at a rate cut, some Democrats are urging them to act quickly to avoid economic downturn. Despite political pressure, Powell is expected to emphasize that the upcoming presidential election is not a factor in their decision-making process.
There is speculation that Powell may hint at a rate cut during his testimony, potentially signaling a move at the July Federal Open Market Committee meeting. The futures market is currently predicting the first rate cut to happen in September.
In addition to interest rates, banking regulations, particularly the Basel III endgame proposal, will be a key topic of discussion during the hearings. The proposal, which aims to implement stricter bank capital requirements for institutions with over $100 billion in assets, has faced criticism from industry leaders like JPMorgan Chase CEO Jamie Dimon.
Despite concerns from industry leaders, Powell has indicated that there may be revisions to the proposal based on feedback from various stakeholders. He has expressed confidence that the final model will have broad support both within the Fed and the broader financial world. Senator Warren criticized Powell’s leadership for giving too much influence to the banking industry in policy proposals. She accused him of advocating for cutting capital requirements in half, which she believes is a result of personal intervention and lobbying by big bank CEOs.
The Federal Reserve will closely monitor the CPI and PPI data following Powell’s recent appearance on Capitol Hill. The June CPI report is expected to show a slowdown to 3.1 percent, with core inflation projected to ease to 3.3 percent. Producer prices are anticipated to rise month-over-month and year-over-year, with core PPI expected to climb as well.
The financial markets are hoping for softer-than-expected inflation data to push the Fed towards a rate cut. Economists believe that a combination of easing inflation and economic weakness could prompt the Fed to lower interest rates, potentially as soon as September.
Despite expectations of falling inflation, there are concerns about stubborn inflation in certain sectors. U.S. households are skeptical about the Fed’s ability to reach its 2 percent inflation target, with survey data showing expectations of higher inflation in the coming years.
Recent economic indicators point to weakness in the national economy, with consumer spending growth slowing and signs of a weakening labor market. GDP growth is expected to remain lackluster this year, with potential for reacceleration in 2025, though uncertainty surrounding the November election adds to economic concerns. Please rewrite this sentence.
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