FX.co ★ Jerome Powell did not change his rhetoric at a speech to Congress.

The head of the Fed held his first speech in the US Congress yesterday, before the Banking Committee. As we expected, Jerome Powell's rhetoric has not changed compared to a week ago, when a press conference was held after the Fed meeting and a 0.75% rate hike. It didn't change because there was no reason to change it. Over the past week, not a single important report has been published in the States, so based on what should Powell have changed his position? "We understand the difficulties that high inflation creates for the American economy and we are determined to return it to 2%," Powell said in the Senate. "We have all the necessary tools for this." The head of the Fed also noted that for a strong and stable labor market that will work for the benefit of the economy, price stability is also very necessary. Recall that some experts now note that low unemployment only spurs inflation to further growth, since there are not enough workers in some areas and companies are forced to raise wages to retain or attract employees. Powell also noted that he sees the first signs of a slowdown in inflation, since last month the base indicator "leveled off or even slightly decreased." Recall that yesterday, it also became known in the UK that core inflation slowed down a bit, but we would not open champagne on this occasion, since one report is not a trend.

The head of the Fed also noted that the overall state of the US economy as a whole is very good, the labor market is strong, and demand is steadily high. According to Powell, the economy will withstand higher rates, and the risks of recession are not too high yet. At the same time, the Fed will monitor each report to promptly respond to changes in the economy and make decisions on monetary policy parameters based on them. However, in July, most likely, the rate will be increased by 0.75%, as there are no serious signs of a slowdown in the pace of price growth. Recall that at the same time, the expectations of the market itself for the value of the key rate by the end of the year are also growing. Now, most of the experts surveyed agree that the rate by the end of the year will be about 3.4%. Today will be Powell's second speech in the Senate, before the Financial Services Committee. We believe that the essence of his speech will remain unchanged, so if the US stock market did not work out Powell's speech too zealously yesterday, there may be no reaction at all today. Our forecast remains the same: rates will rise, the economy will slow down (the only question is how fast?), and the stock market and other risky assets (including cryptocurrencies) will fall.