Special topic: Powell's last hearing before the election: Inflation is still above 2%, so we should not relax too much too early

Glodon July 10 | UniCredit Bank wrote in Today's Market that yesterday, Powell hinted in his testimony that the Fed is close to cutting interest rates, although he declined to comment on the timing of future actions. Powell reiterated that he needed to see more good data to strengthen his confidence that inflation will continue to move toward 2%; but said that inflation is not the only risk and that labor market conditions are now much cooler than two years ago. Powell described the current labor market as fully restored to balance, while in the June monetary policy press conference, he said that the labor market is relatively tight but not overheated. This subtle but important shift means that if the labor market weakens further, the Fed may cut interest rates even if inflation remains high (given the Fed's dual mission of promoting maximum employment and price stability).

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