Powell's testimony (LIVE)

Fed Chair Powell appeared before US Senate Banking Committee at 3:00 pm BST today for the first day of his semi-annual testimonies. Text of his speech was not pre-released this time, adding to uncertainty ahead of the event. Text was released at 3:00 pm BST and has been hawkish.

• Q1 data did not support greater confidence in inflation path needed for rate cuts
• A policy rate cut is not appropriate until Fed gains greater confidence inflation headed sustainably towards 2%
• Elevated inflation is not the only risk we face
• More good data would strengthen our confidence in inflations
• We have made considerably progress toward the 2% inflation goal, recent monthly readings show modest further progress
• Reducing restraint too late or too little could weaken economy and jobs market
• Reducing restraint too soon or too much risks reversing inflation progress
• Restrictive policy is helping put downward pressure on inflation
• We continue to make decision on meeting by meeting basis
• US economy is expending at a solid pace
• Risks to achieving employment, inflation goals come into better balance
• Labour market conditions have cooled while remaining strong, and are not overheated

USD gained following release of the text of the speech, while gold and US indices moved lower. Hearing has begun with a little delay and Q&A session, which is the next potential source of volatility will begin soon. We will update this post with key takeaways.

Below are key takeaways from the Q&A session at the Senate Banking Committee:

• Recent data showed that labour market has cooled considerably, and is no longer an overheated market
• Labour market is still strong and is more or less back to pre-pandemic levels
• It is not likely that the next move will be a rate hike
• We have a significant housing issues in the country. Pandemic has created new distortions in housing market
• Our tighter policy is having an effect on activity in housing sector
• Job creation is narrowing in the economy
• I'm not sending any signals today about timing of future Fed policy actions
• We need good inflation data to cut rates
• Timing of cuts will depend on data and what is happening in the labor market
• If labor market weakens unexpectedly, that could also be a case for a rate cut
• Wage increases are still very high, but are coming down to more sustainably levels

The Q&A a session turned out to be largely non-event, with members of the committee often asking political questions and Powell refusing to answer, reasoning it with Fed's impartiality and political neutrality. Questions about changes to Basel III rules were also made but Powell did not provide any specifics. Markets have been calm during the Q&A session and we have not seen large moves. USD moved gained further slightly, while US indices moved to daily lows.