A lot of the focus in the March 6 week will be on Fed Chair Jerome Powell and the semiannual monetary policy testimony. He will appear before the Senate Banking Committee on Tuesday at 10:00 ET and again before the House Financial Services Committee at 10:00 ET on Wednesday. In his prepared remarks, Powell is likely to stress that the fight against inflation – especially non-housing services inflation – is far from over and that the FOMC is committed to staying its rate-hike course until inflation is sustainably moving back towards the Fed’s 2 percent flexible average inflation target. What policymakers will be looking for is the cumulative effects of past rate hikes. Powell will signal a willingness to adjust policy as economic data come in. So far, more restrictive monetary policy hasn’t harmed the labor market if the available data is to be believed. While interest rate sensitive sectors and those most likely to respond on the demand side have shown improvement in inflation trends, there is a core within the core that is resistant to the Fed’s primary tool of interest rates.

Friday will see the release of the February employment situation at 8:30 ET. The early forecast consensus is for payrolls up around 200,000 and the unemployment rate at 3.5 percent. This would be a more reasonable pace of job gains than the upside surprise of 517,000 in January, and much more in line with an economy in modest expansion. A slight rise in the unemployment rate from 3.4 percent in January will not change the underlying story of a tight labor market.

The Fed will release the Beige Book on Wednesday at 14:00 ET. It will cover economic conditions roughly from early January through late February. The last four Beige Books have shown that growth is weak across the 12 Districts over a time which coincided with the start of aggressive rate hikes on the part of the Federal Reserve. It is possible that regional economies have worked through the initial upsets in various interest rate sensitive sectors and things are back on track for somewhat better activity.

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