Powell Testimony: Key Takeaways

5:47 PM June 22, 2022

Testimony of FED chairman Jerome Powell in front of Senate has just ended. Initially indices moved higher and dollar weakened after remarks regarding demand destruction. However later on sellers managed to taper some of the gains. 

Below we present some key takeaways from the Q&A session:

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  • FED strongly committed to reducing inflation and understands the full scope of the problem

  • Most recent indicators pointed that pace of rate hikes should be accelerated

  • Central bank will focus on parts of the economy where demand exceeds supply

  • Impacts of China lockdowns on supply chains are not yet visible, while some signs indicate that Chinese growth may pick up

  • Policymakers would like to raise rates to a 'modestly restrictive level'

  • Policymakers do not think it's necessary to provoke a recession, however it essential to achieve price stability

  • Asked about 100 bps, Powell said he will never take anything off the table

Powell did not sound very optimistic during his testimony. He points out that there is a high risk of a recession and it will be very difficult to achieve a "soft landing". At the same time, his communication suggests that the Fed may be getting ready for another hike by 75bp in July (bu a lot will depend from the data).

GOLD price retreated slightly during the testimony, however major support at $1823 has not been breached. Source: xStation5


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