Powell To Point To 50bp, But Hawkish On Terminal (1/2)

Fed Chair Powell is due to speak at 1330ET / 1830 UK on "Economic Outlook, Inflation, and the Labor Market" at Brookings, with Q&A. Powell speech link is here; webinar registration here. Prior Powell pre-Q&A speeches at Brookings have been brief and released under embargo, so we would expect the same this time.

• Powell's commentary is more likely to contain hawkish than dovish surprises. The dovish part is that the message from the event will likely to cement December pricing for a 50bp hike as opposed to 75bp, with Powell eyeing the pre-FOMC blackout period ahead, avoiding uncertainty in the event of a Nov CPI surprise (the release is the 1st day of the 2 day meeting).
• But as we noted in our review of the FOMC Nov minutes, Powell is likely to have been one of the "various" participants whose assessment of the terminal rate was higher than had been previously expected - not least because he said at the Nov presser that the data since the previous meeting "suggest to me that we may ultimately move to higher levels than we thought".
• If Powell confirms this today it would be hawkish (since "various" was seen as showing less FOMC consensus over terminal rates than "many" or "most"), but with any assessment of the envisaged terminal rate potentially driving the overall market impact.
• He's likely to be circumspect on that front, citing high uncertainty and waiting for incoming data. But that said, it may come down to the Q&A: he rarely entertains hypotheticals, but if asked point-blank whether the terminal rate could be well above 5%, he's very unlikely to dismiss it out of hand.