Investors are keenly focused on the United States today, where Federal Reserve Chairman Jerome Powell will be testifying before Congress. One of the duties of the Fed’s Chair is to update the government on the current state of the economy, as well as the central bank’s plans regarding monetary policy in the future.
Powell has already spoken of these matters, including last week, when he stated that interest rates will likely have to remain close to zero for over a year and that the Federal Reserve will support the economy through more stimulus packages, without cutting interest rates below zero.
Just this week the Fed already began unveiling a new asset purchasing stimulus package, which Powell most probably will touch upon during his testimony. Overall, while Powell is not expected to deliver any surprises, investors believe his statements will have a positive effect on the markets, especially stocks, which rally on the prospect of more stimulus.
There will also be retail sales and industrial production reports from the United States today to further show how the US economy is doing. Overall, improvements are expected as states have started phasing out of lockdowns since May.
Besides the Federal Reserve (and the European Central Bank recently), other central banks are also considering more stimulus measures as the coronavirus pandemic proved far more damaging to the global economy than past estimates.
The Bank of Japan already announced a new stimulus package which will bump up its total purchases to roughly 1 trillion US dollars. The Bank of England is expected to follow suit.
Despite the persistent risks on the financial markets, right now the news about robust stimulus plans around the world are succeeding in providing sufficient support, and are thus promoting higher risk appetite among investors.
