Source: Wind

Federal Reserve Chairman Powell will deliver a policy speech that may be critical on Thursday. His mission is to convince the market that the Fed is committed to continuing to curb inflation, but it may require less effort now.

At a critical moment for the US economy, the monetary policymaker will deliver a speech at the New York Economic Club at noon EST.

Inflation data has been improving recently, but US Treasury yields have been soaring, which sends conflicting messages about the direction of monetary policy. Markets generally expect the Fed to keep interest rates unchanged, but they will expect Powell to confirm and clarify how officials view the current situation and long-term trends.

Luke Tilley (Luke Tilley), chief economist at the Wilmington Trust (Wilmington Trust), said: “Powell is always refuting anything that helps encourage them to be vigilant, and for understandable reasons.” “I just want him to keep talking about the strength of the economy and the surprisingly strong consumption in the third quarter, which is a risk of inflation. That's enough for us to keep talking about staying alert.”

Essentially, Tilley expects Powell's message to be divided into three parts: the Fed needs to raise interest rates quickly, and it did; it must find a peak level, which is part of the current debate; and it needs to figure out how long interest rates will need to stay at this high level before inflation returns to the 2% target.

“In fact, their ultimate goal is to keep the financial environment tight and thereby reduce inflation,” he said. “He will use this framework, even if he is dovish about November 1 (the Fed's next interest rate decision) or December, to shift his hawkishness to the third question, which is how long interest rates will remain at this high level.”

“Going higher over a longer period of time” has become unofficial rhetoric in recent days. Philadelphia Federal Reserve Bank President Huck specifically mentioned his views on policy earlier this week.

Huck and several other Fed officials insist, at least in the near future, not to raise interest rates for the time being as they weigh the impact of upcoming data. Federal Reserve Governors Philip Jefferson (Philip Jefferson) and Christopher Waller (Christopher Waller) also delivered speeches earlier this month. Waller said that the Fed can “wait and watch” before adjusting interest rates.

Powell is also expected to join the ranks on Thursday, although his speech was full of warnings not to be complacent in the fight against inflation.

Jeffrey Roach (Jeffrey Roach), chief economist at LPL Financial, said: “Powell must show a calm, neutral image in front of investors and allow others to be more aggressive.” “They won't announce victory, which is one reason Powell will continue to make hawkish remarks.”

Similar to other speakers, Powell is likely to reaffirm the Fed's focus on data. Previously, the Fed took more aggressive steps and raised the benchmark borrowing interest rate 11 times, for a total of 5.25 percentage points, the highest level in 22 years. The Federal Reserve chose not to raise interest rates in September.

However, since the yield on 10-year US Treasury bonds is already close to 5%, the highest point in 16 years, outsiders will also seek guidance from Powell on his views on rising yields.

Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said in a client report that Powell “will stick to the information that the data is stronger than expected, but yields have also fluctuated greatly. This has led to a tightening of the financial environment, so there is no need to urgently issue a policy response in November; the Fed can adopt a wait-and-see attitude.”

Editor/Jeffy