Ahead of today's testimony from Jerome Powell on Capitol Hill, two Fed governors were out in recent days floating a July rate cut balloon.
Did the Fed Chair use this "expectations reset" to confirm a signal to markets that the Fed is ready to end the six month pause in the easing cycle — maybe by next month?
Not exactly.
His prepared remarks were more of the same stuff we've been hearing. The economy is good, and they can afford to "wait to learn more."
And he specifically cited the June and July inflation numbers to watch, to see how much of the tariffs are being passed through to consumers. The July inflation data won't be reported until August.
So, fair to say Jerome Powell wasn't walking in today with a plan to signal a July rate cut.
That said, from Jerome Powell's perspective, there's little-to-gain in doing so. The next Fed meeting is more than a month away. And stocks are now back at record highs, with tailwinds building from reduced geopolitical risks, a budget bill that will deliver tax cut extensions coming (possibly) within two weeks, and accelerating AI advancements (and related productivity gains).
He doesn't want to provoke a melt-up in stocks, and fuel optimism that could "de-anchor" inflation expectations.
But inflation expectations are tame (chart below).
As for stocks, with the fuel of the July rate cut talk of the past few days, the S&P 500 has now returned to, and surpassed, the level of the January pause in the Fed's easing cycle.