Powell Testimony, Housing Risks, Canadian Tapering: Eco Day

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Welcome to Wednesday, Americas. Here’s the latest news and analysis from Bloomberg Economics to help you start the day:

  • Federal Reserve Chair Jerome Powell begins his semi-annual testimony to the House Financial Services Committee this morning, with Democrats on the panel seeking his support for another round of government spending
    • Republicans are likely to point to yesterday’s hotter-than-expected inflation print as evidence of the dangers of further stimulus
    • Powell will have to have answers for both, while also being aware that a decision on his own future remains in the balance
    • His testimony moves to the Senate tomorrow before he meets with Treasury Secretary Janet Yellen on Friday to discuss risks from the hot U.S. housing market
  • Senate Democrats on the Budget Committee agreed to a $3.5 trillion spending bill which would carry most of President Joe Biden’s economic agenda without needing Republican support. The president will be on Capitol Hill today to discuss the deal
    • While there are still challenges in getting the support of all 50 Democratic senators, the reduction in the size of the bill from a previously-mooted $6 trillion should help ease some worries
    • Powell’s answers to questions on the package today and tomorrow may also carry some weight
  • Bloomberg Economics’ suggests recovery fulled inflation will be more transitory in the U.S. than in the U.K. or euro area
  • The Bank of Canada is expected to continue scaling back emergency levels of stimulus today amid growing optimism about the speed of the recovery
    • Bloomberg Economics’ view is policy makers will strive for a fuller jobs recovery than in the past, the main reason we see a slightly later-than-consensus hike, in early 2023
  • Chile’s central bank is set to deliver its first interest rate increase in over two years on Wednesday, as emergency spending and a speedy vaccination campaign underpin a recovery that’s fueling above-target inflation
  • China’s second-quarter GDP report for Thursday will be watched for potential further signs of post-pandemic slowdow

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