Fed Chair Powell’s Testimony and Market Update

The likelihood of a rate cut in September saw a slight increase following U.S. Federal Reserve Chairman Jerome Powell’s remarks on the economy. Powell emphasized that high inflation is not the sole risk faced by the economy, highlighting the importance of not delaying policy adjustments which could hinder economic growth and employment.

In response to a Senate committee’s questions, Powell acknowledged a significant slowdown in the labor market and expressed the Fed’s awareness of potential downside risks. Despite this dovish tone, Powell reiterated the Fed’s stance on inflation, indicating that a rate cut may not be considered until there is greater confidence in inflation nearing the target of 2%.

The price of bitcoin experienced a brief uptick in reaction to Powell’s testimony before settling around $57,000, showing modest gains over the past 24 hours. In traditional markets, major U.S. stock indexes remained relatively stable, while the dollar and bond yields saw slight increases.

Market analysts are closely monitoring the upcoming June Consumer Price Index (CPI) report, expected to reveal a 0.1% increase in prices last month, with core prices predicted to rise by 0.2%. Annual inflation rates are forecasted at 3.1% for headline inflation and 3.4% for the core rate. Any surprises in the CPI data could swiftly impact the likelihood of a September rate cut, which currently stands at approximately 75%, according to CME FedWatch.