Fed Chair Powell and Colleagues Steal the Show
- Insightful remarks from Fed Chair Jerome Powell and his colleagues set to dominate Thursday’s spotlight.
- Recent explanations from Fed officials shed light on their support for a substantial rate cut at the September meeting.
- Powell’s upcoming speech and Fed commentary could have a significant impact on the US Dollar’s performance against major currencies.
As US Federal Reserve (Fed) policymakers took center stage last week, the US Dollar (USD) continues to feel the effects of the dovish Fed stance on interest rates.
The Fed’s decision to implement a 50 basis points (bps) rate cut last week brought the fed funds rate to a range of 4.75%-5.0%. The Summary of Economic Projections, illustrated in the Dot Plot chart, indicated expectations for an additional 150 bps of rate cuts for this year and the next.
Fed Officials Maintain Dovish Position
Following the rate cut, various Fed officials have provided rationale for supporting a substantial rate reduction, with the exception of Fed Governor Michele Bowman, who favored a 25 bps cut after the September meeting.
Atlanta Fed President Raphael Bostic, Minneapolis Fed President Neel Kashkari, and Chicago Fed President Austan Goolsbee justified their decision to opt for a larger rate cut citing progress on disinflation and softening labor market conditions.
In a statement for a virtual event, Bostic expressed confidence in the 50-basis-point adjustment, positioning the Fed well for potential imbalances in their mandates. Kashkari endorsed the 50 bps cut as the right move, while Goolsbee suggested the need for numerous rate cuts in the coming year.
According to FXStreet’s FedTracker, Goolsbee’s comments were rated as dovish with a score of 2.0, in contrast to Bowman’s more measured approach, which was deemed hawkish with a score of 7.0.
Fed Governor Adriana Kugler also voiced strong support for the recent rate cut, indicating readiness for additional cuts in the future.
Market expectations currently suggest a 61% likelihood of another 50 bps rate cut in November, with over 80% probability of 75 bps or more in cuts over the next two Fed meetings.
Anticipated Impact of Powell’s Speech
With expectations of further rate cuts at the next policy meeting, focus shifts to a lineup of Fed officials set to speak at two upcoming events starting from 13:10 GMT on Thursday.
Notable appearances include Boston Fed President Susan Collins, Fed Governor Adriana Kugler, Fed Vice Chair For Supervision Michael Barr, and Minneapolis Fed President Neel Kashkari at the Boston Fed’s Financial Inclusion and Banking Supervision Workshop.
Simultaneously, Fed Governor Michelle Bowman, Fed Chairman Jerome Powell, New York Fed President John Williams, and Fed official Barr are scheduled to speak at various events, drawing attention to Powell’s remarks for insights on future rate cuts.
Insights into Jerome Powell’s Role
Jerome H. Powell, serving as Chair of the Board of Governors of the Federal Reserve System, plays a pivotal role in shaping US monetary policy. Reappointed for a second term, Powell’s leadership influences key decisions on interest rates and monetary policy.
Federal Reserve FAQs
Here are some common questions and answers related to the Federal Reserve:
- Monetary Policy: The Fed adjusts interest rates to achieve price stability and full employment, impacting the US Dollar’s strength.
- FOMC Meetings: The FOMC assesses economic conditions and makes policy decisions at eight annual meetings.
- Quantitative Easing (QE): In crisis situations, the Fed may increase credit flow through QE, typically weakening the US Dollar.
- Quantitative Tightening (QT): The reverse of QE, QT involves reducing bond purchases, potentially strengthening the US Dollar.