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The March 4 week has two reports that are likely to inform the tone of the deliberations at the upcoming March 19-20 FOMC meeting. However, these will be overshadowed by Fed Chair Jerome Powell\u2019s upcoming semiannual monetary policy testimony \u2013 what old hands still call the Humphrey-Hawkins testimony. Powell will appear before the House Financial Services Committee at 10:00 ET on Wednesday, and the Senate Banking Committee at 10:00 ET on Thursday.<\/p>\n\n\n\n
Beyond what any of the economic data say, markets will be listening carefully to see if Powell\u2019s testimony has any give on the outlook for monetary policy which has been firmly one of keeping the fed funds target rate range at 5.25-5.50 percent until inflation is tamed and price stability reestablished. However, even if that side of the dual mandate is achieved, Fed policymakers may be taking a closer look at the maximum employment side. The US labor market remains tight in the historical context. The FOMC may be reluctant to add any stimulus to the economy via looser monetary policy which could spark more demand for workers at a time when labor supplies are still stretched. It could bring on another round of escalation in wage competition. This would be an unwanted source of inflation and unwelcome to businesses that are still dealing with rising costs of attracting and retaining workers.<\/p>\n\n\n\n
Policymakers will comb through the anecdotal evidence in the next Beige Book at 14:00 ET on Wednesday. The report will cover the period between early January and late February. While FOMC forecasts have anticipated a slowing in growth in the US, the GDP numbers continue to come in above expectations, largely due to strong consumer spending. With the FOMC due to update its quarterly forecasts at the March meeting, policymakers will be trying to assess if the expected slowdown is still on the near horizon or if growth looks to remain at or above the FOMC\u2019s longer-run forecast of 1.8 percent. GDP Nowcasts are pointing to growth above 2 percent in the first quarter 2024. Recent Beige Books have been consistent with growth across the 12 Districts running from slowing to unchanged to modest expansion. On net, the numbers would signal a US economy in recession except that the strength in the labor market, moderation in inflation, and easing in upward wage pressures are keeping it out of a downturn.<\/p>\n\n\n\n