Powell Continues To Tow The Line / Beige Book No Surprises / Hunt's Smoke And Mirrors
As was widely expected, Fed Chair Powell's prepared remarks, for the semi-annual testimony before the House Financial services Committee, did little to shed any new light on the Fed's approach to future monetary policy. Powell reiterated that the central bank “may cut rates at some point this year” however, remains data dependent and will “look for further evidence to gain greater confidence that inflation is indeed moving sustainably to the Fed's 2% target”.
“In considering any adjustments to the target range for the policy rate, we will carefully assess the incoming data, the evolving outlook, and the balance of risks”, Powell remarked. In the face of recent comments of potential hikes, Powell stated that the "policy rate is likely at its peak for this tightening cycle. If the economy evolves broadly as expected, it will likely be appropriate to begin dialling back policy restraint at some point this year. But the economic outlook is uncertain, and ongoing progress toward our 2% inflation objective is not assured".
We also had the latest release of the Fed’s Beige Book, showing that economic activity increased slightly since early January with the outlook for economic growth remaining generally positive. “Economic activity increased slightly, on balance, since early January, with eight districts reporting slight to modest growth in activity, three others reporting no change and one district noting a slight softening”, the report noted.
Lastly, the Chancellor of the Exchequer’s budget yesterday held very few surprises, seeing that most of the major policy changes had already been leaked. The main takeaways were 2% off National Insurance (NI), limiting the exemptions for non-doms, a reform to child benefits and the continued squeeze on public services.
Of course, what he failed to mention was the six-year freeze on tax thresholds introduced in 2021 more than cancels any reductions in NI, and the UK still has the highest tax burden since 1948, at just over 37% of GDP.
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