Comments from Federal Reserve Governor Jerome Powell in Washington (live stream below)
- Rate hike case relies on data supporting his outlook
How soon is 'fairly soon'? Sounds like he's more in the July or Sept camp than in June.
- Need significant strengthening in Q2 to confirm outlook
- Brexit vote is among risks to global outlook
- Sees US growth outlook around 2%, inflation rising over time
- Pace of hikes should be gradual
- Reasons for gradualism include weak global demand
- Ongoing buildup of debt in China is 'notable'
- Employment solid, consumption less positive
- Core inflation has been held down by lower import prices
- Inflation expectations seem to be under some downward pressure
- Full text
Key paragraph:
"If incoming data continue to support those expectations, I would see it as appropriate to continue to gradually raise the federal funds rate. Depending on the incoming data and the evolving risks, another rate increase may be appropriate fairly soon," he said.
So his comments on Q2 growth, Brexit and 'fairly soon' diminish the chance of a June hike but probably improve the odds of a move in July or September. Markets are priced for only a 52% chance of a hike in July and 60% in Sept. That's starting to look low.
So even if you zero out the likelihood of a June hike, the rising chance of July/Sept is dollar bullish. On the headlines, the dollar has caught a small bid.
Powell will take audience questions later. Here is a livestream of the appearance.
Update:
Reading through the whole speech, the main emphasis is slow, gradual hikes. Still, the market doesn't have any hikes full priced in for the next year so it's invariably dollar-bullish.
