Analysts See Powell Reiterating Nov Message (1/2)

Analysts' expectations for the Powell appearance vary, though he is generally expected to stick close to the November press conference messaging:

• BMO: Watching for risks of a similar dynamic of the November meeting where Powell's message shifted the market's understanding of the terminal rate higher: "was enough to push 2-year yields to fresh cycle highs, and while we’re skeptical a 30 bp selloff from current levels in 2s is in the offing, a similar reminder on Wednesday afternoon certainly holds the potential to provide a bearish impulse going into payrolls. Any indication that a terminal upper bound above 5.25% is on the table would only add to the deeper inversion trade and put a rechallenge of the new cycle flat at -81.1 bp in 2s/10s quickly on the table."
• Deutsche: Powell to reiterate the key messages from the November press conference; while unlikely to push back on 50bp Dec hike pricing, he could repeat that reaching a “sufficiently restrictive” stance is likely to require a higher terminal rate vs September's SEP. Focus on "whether he repeats the language that it is “very premature” to contemplate pausing and that tightening has “a ways to go”." With significant data between now and the Dec FOMC, he may "look to preempt any counterproductive easing in financial conditions that might result from further downside misses."