Analysts Eye Powell Insights On Rates, Reaction Function, RRP (4/4)

Some sell-side analyst views on what to look for at Powell's testimony:

• BMO: Using Powell’s press conference as a guide, we expect that the Chair will strike a cautious, data-dependent tone that reiterates the wait-and-see messaging. It follows intuitively that Powell is likely to err on the side of restrictive for longer rather than unduly emphasizing the potential for a July hike...we’re less convinced that a quarter-point hike next month is a foregone conclusion and we’ll look to Powell’s testimony to further refine expectations.
• Deutsche: Given that Powell will be testifying on behalf of the FOMC, he will likely reprise many of the themes from last week's press conference, which was focused on the Committee's expectations around further tightening moves...on the labor market, which Congress is always focused on, Powell noted that it remains very tight but that there are “some signs supply and demand in the labor market are coming into better balance.” Though banking sector stresses appear to have subsided since March, Congress is sure to query Powell about the health of the banking system as well as regulatory matters. We would not be surprised for Congress to pepper Powell with questions around recession risks.
• ING: The question is whether the much-awaited Powell testimony tomorrow will deliver a further update to the Fed’s reaction function, or if markets materially differ from what the Fed sees as the appropriate path for policy rates.
• Wrightson ICAP: Powell last week said “I would say that the RRP facility doesn't look like it's pulling money out of the banking system”. This is a topic that is sure to resurface in the semi-annual Humphrey-Hawkins hearings , and the Chair is likely to continue to downplay potential technical complications related to the RRP facility.