All eyes on Fed Chair Jerome Powell’s testimony to the US Congress

All eyes will be on Fed Chair Jerome Powell’s testimony to the US Congress this week. The testimony of Federal Reserve Chair Jerome Powell is scheduled to be a regular update of monetary policies to Congress.

Powell’s testimony has become increasingly important after Trump returned to the White House as the US President.

Trump has been critical of higher interest rates and has called for rate cuts. However, with inflation remaining sticky, US Fed chief Powell, who had earlier maintained that rate cuts would be data-dependent, ruled out a rate cut at the January FOMC meeting.

Fed Chair Jerome Powell will testify before The Committee on Banking, Housing, and Urban Affairs on Tuesday, February 11, 2025 at 10:00 AM and before the House Financial Services Committee on Wednesday, February 12, 2025 at 10 am in his semi-annual monetary policy testimony to Congress.

The testimony and subsequent Q&A sessions could cause significant market volatility due to strong economic data and the Fed’s resistance to March rate cut expectations.

There are concerns about inflation re-igniting in the backdrop of Trump’s newly imposed tariffs on imports from other countries. Powell halted after three rate cuts due to a strong job market and a potential rise in inflation.

Inflation appears to be re-emerging in the US economy, which may prevent the Fed from decreasing interest rates quickly.

One-year inflation estimates increased to 4.3%, the highest level since November 2023, according to the University of Michigan’s consumer mood index, which was released last week. Americans now expect an inflation rate of 4.3% over the next 12 months, a full percentage point more than last month.

On Tuesday and Wednesday, Powell is expected to discuss the economy’s strength as a key rationale for the US Fed’s decision not to significantly lower interest rates.

US Fed will also want to buy time to understand he economic impact of Trump’s tariffs announcements that are looking to be inflationary in the long term.

Overall, the market experts will closely monitor Powell’s comments for any changes in stance on inflation, economic growth, and potential rate cut timing.