Powell To Stress Data Dependence, Limited Pushback On Hike Repricing (1/3)

The focus of the session is Fed Chair Powell's semi-annual testimony before the Senate Banking Committee (1000ET/1500GMT), which comes ahead of the FOMC blackout period starting this weekend, and the Mar 21-22 meeting. The last time we heard from Powell was on Feb 7, following the Feb 1 FOMC decision and the Feb 3 upside payrolls surprise.

• A transcript of that Feb 7 appearance is here; there was a modest immediate dovish reaction to his comments. But since that appearance, stronger-than-expected data have seen terminal rate expectations jump by 40+bp with the peak seen in September vs May prior.
• The main question (and primarily one for the Q&A) is whether Powell pushes back against this sharp repricing.
• It's likely he will be noncommittal if asked, using similar language to Feb 7: "if the data were to continue to come in stronger than we expect and we were to conclude that we needed to raise rates more than is priced into the markets or that we wrote down at our last group of forecasts in December, then we would certainly do that. We would certainly raise rates more."
• With both a CPI and a jobs report before the next FOMC, he will emphasize that data dependence. If anything he's likely to err to the hawkish side of expectations, acknowledging again that data have been stronger than the FOMC expected in December, and that the Committee's view of the terminal rate may have risen from 5.1%.
• A nod to a re-acceleration to a 50bp March hike is less likely though. He might downplay it (if it comes up at all), emphasizing that the ultimate level and the length of time rates spend there are more important than the pace.