The stock market has hit new highs as concerns over the U.S. trade battle with China have eased in recent weeks. But at the same time, growth slowed in the second quarter, and is tracking about a 1.3% annual rate, according to the Atlanta Fed’s tracker.
“He will affirm the economy remains solid, if not spectacular,’’ said Diane Swonk, chief economist at Grant Thornton. “What matters most is what he sees as headwinds and how he characterizes those risks. They are driving the desire to do an insurance cut.’’
Trump Attacks
Powell is likely to be asked to respond to repeated criticism from Trump and pressed to discuss his conversations with the president. “We don’t have a Fed that knows what they’re doing,’’ Trump said July 5.
The president has said he has the right to fire or demote Powell, while the Fed chief has said he intends to serve his full four-year term as chairman and “the law is clear” on that issue.
“Powell will continue to stress Fed independence, that the committee is made up of a number of people and there’s a strong debate,’’ said Sarah House, senior economist at Wells Fargo & Co. “The answers will be short and he will try to move on.’’
Democrats in Spotlight
The questioning of Powell from two members of Congress in particular will merit some special attention.
Senator Warren of Massachusetts, a Democratic presidential candidate, has typically direct, confrontational questions that have sometimes wrong-footed Fed leaders. Freshman Representative Alexandria Ocasio-Cortez, a self-described socialist and social-media star, has proven to be an adept inquisitor during congressional hearings.
They or others could press Powell to explain the Fed’s yearlong review of its framework for monetary policy. With inflation missing the central bank’s 2% goal for most of seven years, the Fed is considering adopting a new approach that could include overshooting its target to compensate for misses on the low side in the past.