Stock market investors are awaiting the Federal Reserve Chair Jerome Powell’s speech at the Economic Club of Washington for more clues about the central bank’s tightening path. At The Economic Club of Washington, D.C., David Rubenstein will interview Jerome H. Powell, Chair of the Board of Governors of the Federal Reserve System, at 11:00 a.m Tuesday, February 7, 2023.
On the back of last week’s unexpectedly strong US jobs report, the prospect of further Federal Reserve rate hikes has increased. The strong US labour data released on Friday had serious implications for Fed policy as it confirms that the Fed will have to raise rates for a longer period of time than optimistic market scenarios had priced in.
Also Read: US CPI calculation to change for January inflation data
Meanwhile, investors are debating whether Powell will emphasise that expectations for rate cuts later in 2023 are likely overstated. Atlanta Fed President Raphael Bostic stated on Monday that the strong jobs data released on Friday raises the possibility that the central bank will need to raise interest rates to a higher peak than previously anticipated.
With the unemployment rate at 3.4%, the lowest since 1969, this is exactly what the Fed may not want. A strong job sector could fuel inflation which at 6.5% is still away from the 2% comfort range of the Fed.
Although Fed Chairman Jerome Powell struck a dovish tone at the start of February, recent earnings reports and the most recent economic indicators suggest otherwise. As corporate earnings fall, markets are reacting strongly to the prospect of a more hawkish Fed.
Inflation may still play a spoilsport, and if January US CPI data shows prices rising or not cooling much, the market scenario may see a quick turnaround. The January 2023 CPI data are scheduled to be released on February 14, 2023, at 8:30 A.M. Eastern Time. And, starting January 2023, a new methodology will be used to compute inflation figures. Beginning, the Bureau of Labor Statistics will change the method of calculating inflation data with the release of January 2023 CPI data that will mark the start of the transition to yearly weights.
