Jul 08, 2019
Powell Testimony Takes Center Stage
On Wednesday and Thursday this week, at 14:00 GMT, the head of the US Federal Reserve, Jerome Powell, is expected to testify twice in front of Congress. The importance of his testimonies cannot be overstated and if Powell does announce a rate cut, this will mark the first rate cut in 11 years. Interestingly, the markets have priced in a 100% chance of the Fed cutting rates but the big concern is if Powell is really convinced that interest rates should be dropped? Last week, on Friday, the NFP report was released and this increased the odds against a rate cut. In response, market volatility is rising in the Asian markets this morning.
Interestingly, President Donald Trump has made remarks and is adding pressure for the Fed to reduce rates. He is in fact, one of the only US presidents who is encouraging the Fed to cut interest rates as this will boost the US stock market. When interest rates are reduced, money is usually pushed away from bank deposits and into the stock market, pushing it higher.
If Powell hints that the Federal Reserve will not cut interest rates, a massive downside pressure on the US stock market is likely to be triggered.