Eyes on 'Powell's Words' at US Congress Appearance... January Employment Data in Focus

Market attention is focused on the message that Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), will deliver when he appears before the U.S. Congress on the 6th and 7th (local time). Ahead of the March Federal Open Market Committee (FOMC) meeting scheduled for the 19th and 20th, with inflationary pressures continuing, he is expected to reaffirm a cautious stance on interest rate cuts.

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According to the Fed on the 3rd, Chairman Powell will appear before the House of Representatives on the 6th and the Senate on the 7th for two consecutive days to deliver the semiannual monetary policy report. He is expected to share his views on the overall state of the U.S. economy, the fight against inflation, and the timing of interest rate cuts.

Chairman Powell is anticipated to reiterate his existing position of not rushing into interest rate cuts, as the battle against inflation is not yet over. The core Personal Consumption Expenditures (PCE) price index, which the Fed closely monitors, rose 2.8% year-over-year in January, down slightly from 2.9% in the previous month and in line with market expectations. However, other inflation indicators rose unexpectedly. The January Consumer Price Index (CPI) and Producer Price Index (PPI) increased by 3.1% and 0.9% year-over-year, respectively, exceeding forecasts of 2.9% and 0.6%. This suggests that the 'last mile'?the final stretch before reaching the inflation target?in the war against inflation will not be easy.

However, Democratic lawmakers are expected to pressure Chairman Powell, who maintains a cautious stance, to implement swift interest rate cuts. Some Democratic members have urged Powell to lower rates, mindful of the upcoming November presidential election.

Anna Wong, an economist at Bloomberg Economics (BE), said, "Chairman Powell will send a signal to Congress that he will not rush into rate cuts and will maintain a hawkish (monetary tightening preference) stance. If financial conditions tighten further, pressure on the economy will continue, and monetary policy is likely to have additional sustained (economic) effects."

The most important indicator to be released this week is the February employment report, scheduled for release on the 8th. Nonfarm payrolls, which clearly reflect the U.S. employment situation, are expected to increase by 200,000 in February, about half of January's 353,000. The unemployment rate for February is projected to remain steady at 3.7%, the same as in January.

Additionally, the U.S. Department of Labor's January Job Openings and Labor Turnover Survey (JOLTS) and the February nonfarm payroll data from private employment firm ADP will be released on the 6th. The number of job openings in U.S. companies is expected to have decreased from 9.026 million in December last year to 8.895 million in January this year.

The Fed's economic assessment report, the Beige Book, will also be released on the 6th.

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