Tomorrow (Mar. 7) and the day after (Mar. 8), Fed Chair Jerome Powell will testify in hearings before the Senate Banking Committee and the House Financial Services panel respectively, to discuss the bank’s latest semiannual Monetary Policy Report (MPR). The report was released on Friday. It reaffirmed the Fed’s commitment to bring inflation back down to 2% by 2025, according to the FOMC's December Summary of Economic Projections, which is included in the MPR.
The headline PCED inflation rate was 5.4% y/y in January. So Powell will say that progress has been made in reducing inflation, but the job isn't done and the Fed has a ways to go. He will likely say that the Fed has a narrowing path to bring down inflation without causing a recession and rising unemployment. Given the forum, he isn't likely to sound any more hawkish than he did at his February 1 press conference.
We will be watching both Powell's testimony and the 2-year Treasury note yield. It has tended to be a good leading indicator for the federal funds rate (chart). It rose to a 16-year high last week and the most inverted 2-year/10-year yield curve in 40 years.