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Jerome Powell’s testimony before the U.S. Congress is set to be a key market-moving event this week.
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Investors are looking for fresh signals on the Federal Reserve’s interest rate trajectory.
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The Fed Chair’s remarks could trigger significant volatility in the US Dollar, equities, and broader financial markets.
Jerome Powell, Chair of the United States (US) Federal Reserve, is set to deliver the Semi-Annual Monetary Policy Report and testify before the US House Financial Services Committee on Tuesday at 14:00 GMT. The event is expected to draw close attention from financial markets worldwide.
Powell will highlight key points from the Fed’s Semi-Annual Monetary Policy Report, released last Friday, in which the central bank acknowledged early signs that tariffs may be contributing to rising inflation. The report also reaffirmed that current monetary policy is appropriately positioned to respond to evolving economic conditions.
During the extended Q&A session, lawmakers are expected to press Powell on the future path of interest rates, inflation trends, and the broader economic outlook. Additionally, questions are likely to focus on the potential impact of President Donald Trump’s policies and ongoing geopolitical tensions on inflation, economic growth, and the Fed’s policy strategy moving forward.
According to the CME FedWatch Tool, markets currently assign a roughly 20% probability that the Federal Reserve will cut interest rates by 25 basis points (bps) in July, following a year of holding rates steady. The updated Summary of Economic Projections (SEP), released alongside the June policy statement, indicated that Fed officials still anticipate two 25 bps cuts in 2025 and one additional cut in 2026—slightly more dovish than the March SEP, which projected two cuts in total.
Speaking to CNBC last Friday, Fed Governor Christopher Waller signaled the Fed could be ready to ease policy as soon as July, citing troubling labor market trends, including high unemployment among recent graduates and slowing job growth. He emphasized that the central bank should act proactively, stating, "We shouldn’t wait for the job market to crash before cutting rates." Echoing that sentiment, Governor Michelle Bowman expressed support for a rate cut at the next meeting, noting that it would help align monetary policy closer to a neutral stance while supporting labor market stability.
Should Chair Jerome Powell, in his upcoming testimony, stress that more data is needed before justifying a July rate cut—and emphasize the need for continued caution—the U.S. Dollar (USD) could strengthen in the near term as markets adjust. Conversely, if Powell hints at the possibility of easing as early as July, the USD could face a sharp selloff. His remarks on inflation will also be closely scrutinized, particularly in light of rising energy prices fueled by heightened geopolitical tensions in the Middle East.
About Jerome Powell (via FederalReserve.gov):
Jerome H. Powell became Chair of the Federal Reserve Board of Governors on February 5, 2018, and was reappointed for a second four-year term beginning May 23, 2022. He also chairs the Federal Open Market Committee (FOMC), the Fed’s main monetary policymaking body. Powell has served on the Board since May 25, 2012, and was reappointed in 2014 for a term ending January 31, 2028.
