Federal Reserve Chairman Jerome Powell pushed back against market pricing of +70% for a 50 bps hike at the March 22 meeting today.
In the first question of his House appearance, he was lobbed a softball along the lines of 'what are you thinking regarding the March meeting' and he read from notes to say they were not planning 50 bps and data dependent.
To me, that sounded like both the question and the answer were scripted because Powell wanted the market to know the Fed is indeed data dependent and not trying to signal 50 bps.
So now it comes down to the data (followed by an inevitable leak to Timiraos). Powell cited today's JOLTS data, which was high so that's a checkmark, though some of the details were weaker; it's also lagging. He also cited non-farm payrolls, CPI and PPI.
The main ones are payrolls and CPI.
What's expected right now?
The consensus is +205K after last month's shock +517K reading and estimates range from +78K to +325K. I would put the line on 'too hot' right around 250K. Right on that line makes it tough for the Fed and of course, there are a number of details that are critical, including the unemployment rate and wage pressures.
If we get something inline with the consensus, the market will swing back towards 25 bps.
Then it will be onto CPI next week, which I think is considerably more important than NFP, due to the lagged effects in jobs.
It's early but the consensus on core and headline inflation is +0.4% m/m with the range on both at +0.3 to +0.5%. Again, the details will matter but an in-line reading would swing the market back towards 25 bps.
The caveat is that the Fed might be stuck following the market or leaking. A 'surprise' 25 bps cut is not the market the Fed wants to send right now as it would show some weakness in the fight against inflation.
On net, it's a data traders' market and I don't see any edge. Trade the numbers as they come and keep a close eye on Timiraos.
