July Fed Rate Cut Odds Increase Amid FHFA Call To Investigate Powell

The odds for a Fed rate cut in July have jumped to 23% following heightened pressure on Jerome Powell. The Fed Chair could be the subject of a Congressional investigation amid pressure from the FHFA over his “deceptive Senate testimony.”

Fed Rate Cut Odds Spike To 23% As Pressure Mounts

According to data from the CME FedWatch tool, the chances of an interest rate cut in July have climbed by 3% in the last week. At the moment, the probability of a July Fed rate cut to 400-425 bps sits at 23.3%, rising on the back of heightened pressure on the Federal Reserve.

Following the Fed’s decision to keep interest rates steady in June, Fed Chair Jerome Powell has come under heavy political pressure to cut rates. US President Trump led the call, bashing Powell for refusing to cut interest rates. Trump piled on the pressure by urging Powell to resign as Fed Chair for costing the US economy losses following his refusal to cut rates.

Apart from Trump, FOMC members expect rate cuts as the screws tighten for Jerome Powell. Federal Reserve Governor Christopher Waller has predicted that rate cuts will begin as early as July, citing positive inflation and employment data.

It remains unclear if Powell and Fed will budge to cut interest rates as the odds of keeping interest rates steady between 425-450 bps hover around 76%. However, Goldman Sachs analysts say the markets are pricing in a potential Fed rate cut, predicting as many as three rate cuts before the end of the year.

FHFA Pushes For Jerome Powell’s Investigation

As the noose tightens for Jerome Powell, the Federal Housing Finance Agency (FHFA) has called for Congress to investigate the Fed Chair. FHFA Director William Pulte urged Congress to investigate Powell for alleged untrue statements in his Senate testimony.

Pulte claims that Powell’s Capitol Hill testimony contained a streak of inaccuracies and a $2.5 billion building scandal, and misinterpretation of the facts is enough to trigger his removal from office. Senator Cynthia Lummis has echoed similar sentiments, taking swipes at Powell over his ostentatious spending by the Fed.

“I am asking Congress to investigate Chairman Jerome Powell, his political bias, and his deceptive Senate testimony, which is enough to be removed for cause,” said Pulte.