Researchers at UOB Group assessed the recent dovish testimonies from Fed’s Jerome Powell.

“FOMC Chair Powell’s Congressional testimony was seen as very dovish, setting the stage for the Fed to cut rates as early as end of this month. Powell highlighted that trade uncertainties and concerns about global economy continue to weigh on the US and repeated that the Fed will act “as appropriate” to sustain US economic growth. He was willing to look past the strong US current data (like the Jun employment) and place more emphasis on the risk of an uncertain outlook. Powell’s most important concerns are cross currents of trade policy and slowing global growth while persistent low inflation is another factor. Following the very dovish Powell testimony, we have revised our Fed call and we now expect a Fed rate cut at the July FOMC (instead of Sep FOMC). This is seen as a pre-emptive “insurance” rate cut in view of the uncertain outlook despite robust current economic data. We do not think the Fed will deploy a “bazooka” 50bps rate cut since this is supposed to be the Fed taking out an insurance policy against an unknown future”.