Powell’s speech draws attention as Fed officials push for a 50 bps rate cut in September

• Comments from Fed Chairman Jerome Powell and his colleagues will be in the spotlight on Thursday.
• Fed officials have recently explained why they backed a huge rate cut at the September meeting.
• Powell’s speech and the Fed’s comment could shake the US dollar against its main rivals.

With policymakers from the US Federal Reserve (Fed) back on the podium late last week, the US dollar (USD) continues to bear the brunt of the Fed’s dovish outlook on interest rates.

The US central bank last week opted for a 50 basis point (bps) interest rate cut, bringing the federal funds rate to a range of 4.75%-5.0%. The summary of economic projections, the so-called Dot Plot, suggested a further 150 bps rate cut for this year and next.

Fed policymakers are sticking to their dovish stance

Since then, few Fed officials have justified their position for a huge rate cut move, with the exception of Fed Governor Michele Bowman, who dissented, favoring a 25 bps cut following the September policy meeting.

Citing progress on disinflation and easing labor market conditions, Atlanta Fed President Raphael Bostic and his Minneapolis and Chicago counterparts Neel Kashkari and Austan Goolsbee, respectively, explained their reasons for their votes on Monday for a big rate cut instead of a smaller first cut over four years. .

In his prepared remarks for a virtual event organized by the European Economic and Financial Center on Monday, Bostic said that “in my view, the 50 basis point adjustment at last week’s meeting positions us well if the risks to mandates ours will appear. to be less balanced than I think.”

Kashkari said the 50 bps rate cut was the “right decision”. Goolsbee, meanwhile, came off the most sympathetic, stating that “more rate cuts are likely needed over the next year, rates need to come down significantly.”

FXStreet’s FedTracker, which rates the tone of Fed officials’ speeches on a scale of 0 to 10 using a custom artificial intelligence model, rated Goolsbee’s words a 2.0.

Fed Governor Michelle Bowman on Tuesday called for a “more measured approach” to cutting interest rates, saying that “I continue to see higher risks to price stability, especially as the labor market continues to be close to estimates of full employment.” workforce”.

Contrary to Goolsbee’s rating, FXStreet’s FedTracker rated Bowman’s words as solicitous with a score of 7.0.

Fed Governor Adriana Kugler said late Wednesday that she “strongly supported” the Fed’s decision to cut interest rates by half a point last week. Kugler added that he would “support further rate cuts going forward.”

FXStreet’s FedTracker rated Kugler’s comments as dovish with a score of 3.2.

Markets are currently pricing in a 61 percent chance the Fed will cut rates by another 50 bps in November, according to CME Group’s FedWatch tool. For the next two Fed meetings, Fed rate changes imply a more than 80% probability of 75 bps or more cuts from the current level.

Powell’s speech to grab the spotlight

Amid growing expectations of a huge rate cut at the next policy meeting, all eyes are on a host of Fed officials scheduled to make appearances at two separate events starting at 13:10 GMT on Thursday.

Boston Fed President Susan Collins, Fed Governor Adriana Kugler, Fed Vice President for Supervision Michael Barr and Minneapolis Fed President Neel Kashkari are scheduled to participate in a virtual discussion at the Boston Fed’s Financial Inclusion and Banking Supervision Workshop. Collins and Kugler are scheduled to speak at 13:10 GMT, while Barr and Kashkari are scheduled to speak at 17:00 GMT.

At 13:15 GMT, Fed Governor Michelle Bowman delivers a speech on the US economic outlook and monetary policy at a workshop organized by the Board of Directors of the Mid-size Bank Coalition of America.

Around the same time, Fed Chairman Jerome Powell’s pre-recorded opening remarks at the US Treasury Market Conference in New York will be delivered. New York Fed President John Williams and Fed official Barr will also speak at the conference.

Meanwhile, Fed Governor Lisa Cook will participate in a moderated discussion on artificial intelligence and workforce development at an event hosted by the Federal Reserve Bank of Cleveland and Columbus State Community College in Ohio. The event is scheduled for 14:30 GMT.

The main focus will be on Powell’s speech as traders look for fresh clues about the size of the Fed’s next rate cuts. Powell, during the post-meeting news conference in September, said that “our decision today reflects growing confidence that the strength in the labor market can be maintained,” adding that “we have concluded that the 50 bps cut was the right thing to do “.

About Jerome Powell (via Federalreserve.gov)

“Jerome H. Powell first took office as Chairman of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed and sworn in for a second four-year term on May 23, 2022. Mr. Powell is also chairman of the Federal Open Market Committee, the System’s main monetary policymaking body. an unexpired term He was reappointed to the Council and sworn in on June 16, 2014, for a term ending on January 31, 2028.”