Futures edge higher ahead of Fed Chair Powell’s testimony

(Reuters) – U.S. stock index futures edged higher on Tuesday, ahead of Federal Reserve Chair Jerome Powell’s testimony before Congress that could shed more light on the central bank’s plans for raising interest rates.

On Monday, the benchmark S&P 500 ended higher than the previous session. This was due to Treasury yields taking a break from the recent rally. The Fed expected that they would hold interest rates higher than most people had anticipated at the beginning of this year.

Powell will be testifying before the Senate Banking Committee, at 10:00 am. ET (14500 GMT): Investors will be focusing on Powell’s confidence in the Fed’s efforts to bring inflation closer towards its target of 2%.

Powell claimed at his press conference last week that the a “disinflationary process” While cautioning that the fight against rising prices had already begun, it was important to remind the central bank that this battle is not over.

Since Powell’s February 1 comments, inflation data has revealed that prices haven’t fallen as far as economists expected. However, the labor market shows signs of resilience.

“We expect Mr. Powell to reiterate that further rate hikes are needed and, if the data were to continue to surprise to the upside, the peak rate would likely need to be higher than the central bank had previously expected,” Analysts at Unicredit said.

“In our view, the bar for re-accelerating the pace of rate hikes is high and the Fed would prefer a shallower path and to hold policy tight for longer, if necessary.”

Two-year Treasury note yields are the best indicator of short-term rate expectations. They reached 4.94% last Wednesday, their highest since 2007. [US/]

CME Group’s Fedwatch tool has revealed that traders are reassessing the rate path based on recent economic data and Fed policymakers’ comments. Money market futures pricing shows a 28% probability of central bank raising rates by 50 basis points more in March according to CME Group.

Fed Fund Rates are projected to reach 5.46%, according to traders. This is up from the current rate at 4.67%.

Data later this week is expected to show nonfarm payrolls increased by 200,000 in February, compared with the much stronger-than-expected 517,000 jobs reported in January.

5.07 AM ET ET: Dow eminis rose 26 points or 0.08%; S&P 500 was up 6.75 point or 0.17% and Nasdaq 100 were up 30.75 percent or 0.2%.

Rivian Automotive was the worst performing stock in premarket trades after Rivian Automotive announced plans to issue bonds for $1.3 billion.

Meta Platforms Inc rose 1.7% following a Bloomberg News report that the company would lay off thousands of employees in an immediate round of layoffs.

Reporting by Sruthi in Bengaluru, Editing by Vinay Dawivedi