Yesterday I wrote that the speech from Powell scheduled for today was an even-bigger event than non-farm payrolls and that’s even more true now. Fed pricing has continued to take a dovish shift and the market is now pricing in 125 basis points in rate cuts in the coming 12 months.

The runs counter to recent Fed commentary that suggests that they don’t want to cut rates until they have a clearer view to low rates and that they’re not confident that tariffs will be a one-off, short-lived boost to prices.

Now the market still believes in the Fed put and that’s very well-founded given the long-term Fed backing of risk assets.

My guess is that Powell will repeat that the Fed doesn’t need to be in a ‘hurry’ to make any move. It’s what Jefferson said yesterday and that might not be enough but that’s been the Fed line since the latest FOMC and given all the turmoil at the moment, it’s the safest course of action.

The problem I have right now is that the market sees a 40% chance of a cut at the May 7 meeting and is pricing in 35 bps in cuts for the June meeting. If Powell doesn’t acknowledge that, then he might sound hawkish and we could get some more kicking and screaming in markets.

For him though, it’s a tough spot, particularly in light of today’s non-farm payrolls. He has characterized the Fed stance as modestly restrictive and do they want to be dovish at a time when tariffs could push PCE inflation to 5%.