Powell is expected to give the message that the rate of increase in interest rates will slow down, and that the fight against inflation will continue in 2023 at the December meeting.
Fed Chairman Powell is expected to speak at the Brookings Institution’s event in Washington on Wednesday before the critical interest rate decision on December 13-14.
The President is expected to signal that he will continue with an increase of 50 basis points after the 75 basis point rate hike in 4 consecutive meetings. However, it may convey that interest rates will increase next year as inflation is still above the 2 percent target.
“Powell will probably give a hawkish speech and talk about the extent of the imbalance in the job market,” said Julia Coronado, Co-Founder of MacroPolicy Perspectives.
Markets expect interest rates to peak around 5% next year. The policy rate is currently in the range of 3.75-4 percent.
Bloomberg Economists Anna Wong, Andrew Husby, and Eliza Winger said: “Powell can remind us that rates are not near their peak yet and will continue to tighten until inflation falls sustainably.”
Minutes from the November 1-2 meeting showed that most Fed officials agreed to slow rate hikes soon.
Powell’s speech will take place two days before the November employment data.
“Since the November meeting, financial conditions have eased, and stock markets have rallied. Powell can repeat his rhetoric that the rate of increase will slow. Still, interest rates will continue to rise, as was the case earlier this month,” said Stephen Stanley, Chief Economist at Amherst Pierpoint Securities. he said.
