One area where Powell will need to straddle the fence is the economy.
Part of the problem with his communications back in the latter part of 2018 was a market perception that Powell wasn’t seeing that the global slowdown was beginning to ithe U.S. The extension from that fear was that the Fed would continue to tighten policy no matter what the data showed.
This week, then offers a challenge to walk the line between awareness of the economic signals but along with a long-stated Powell belief that the U.S. appears to still be growing solidly.
“There are some signs of an actual slowdown in the U.S. So I think it would be nice to see the Fed acknowledge that,” said Shawn Snyder, head of investment strategy for Citi Private Wealth Management. “It would be nice to get an expression from him that they’re looking to sustain the expansion and not hold it back.”
The most recent communication from the Fed came in the minutes from the January FOMC meeting, which indicated a high level of concern about market reaction to policy moves, with members stressing the patient stance toward additional rate hikes.
Snyder said Powell should continue to emphasize a relaxed policy stance.
“Right now people think the next policy move could be a rate hike or a rate cut,” he said. “It would be nice for the market to think the next policy move would be a pause and potentially a rate cut. The market wants to hear them be even a little more dovish.”