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Expand chart
Data: CME FedWatch Tool; Note: Data as of Nov. 13 at 5:44pm CT; Chart: Andrew Witherspoon/Axios

Fed chair Jerome Powell again laid out his rose-colored view of the U.S. economy on Wednesday, telling the congressional Joint Economic Committee that he sees the U.S. as “being in a good place." He reiterated that a "material reassessment" of the economic outlook would be required for the Fed to raise or cut interest rates any time soon.

Why it matters: Powell's testimony was the cherry on top of the good news sundae that has sent traders' appetite for risk soaring over the last two weeks, and priced out expectations for further U.S. interest rate cuts through the end of next year.

What we're hearing: "It's amazing the collective wisdom of the market," says Gautam Khanna, senior portfolio manager at BNY Mellon, which manages at least $1.3 trillion in assets.

  • When the Fed raised rates in December, "the market said the Fed was making a mistake. 'Europe is slowing, we're facing a trade war, there's Brexit,' and it reacted. The Fed has since [cut interest rates three times] and the market is happy with that," Khanna tells Axios.

Powell has maintained this rosy outlook all along, "but the market needed to see the rate cuts," Lale Akoner, BNY Mellon's global market strategist, adds.

  • "Now that the market has received those rate cuts, financial conditions have eased, which will avoid a hard crash" for the economy.

Watch this space: Akoner says she expects the Fed to remain on pause through the end of next year and for U.S. Treasury yields to rise by around 100 basis points in the near future.

Between the lines: Fed fund futures pricing has shown investors consistently betting the economy would deteriorate this year and into 2020, forcing the Fed to continue to cut rates at least two more times by June.

  • Over the past month the market has reversed those bets, and now is pricing in a less than 5% chance of a cut before year-end and less than a 50% chance of a rate cut by December 2020.

Quick take: “Looking ahead, my colleagues and I see a sustained expansion of economic activity, a strong labor market, and inflation near our symmetric 2% objective as most likely,” Powell told the congressional committee Wednesday.

  • "This favorable baseline partly reflects the policy adjustments that we have made to provide support for the economy.”

What's next: Investors will be closely watching U.S. economic data to see if that is the case.

Go deeper: Recession fears have vanished

Go deeper

Updated 2 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Health: Ipsos poll: COVID trick-or-treat.
  2. World: Greece tightens coronavirus restrictions as Europe cases spike.
  3. Economy: Conference Board predicts economy won’t fully recover until late 2021.
  4. Education: Surge threatens to shut classrooms down again.
  5. Technology: Fully at-home rapid COVID test to move forward.
  6. Travel: CDC replaces COVID-19 cruise ban with less restrictive "conditional sailing order."

Trump's legacy is shaped by his narrow interests

Illustration: Annelise Capossela/Axios

President Trump's policy legacy is as much defined by what he's ignored as by what he's involved himself in.

The big picture: Over the past four years, Trump has interested himself in only a slim slice of the government he leads. Outside of trade, immigration, a personal war against the "Deep State" and the hot foreign policy issue of the moment, Trump has left many of his Cabinet secretaries to work without interruption, let alone direction.

Bryan Walsh, author of Future
5 hours ago - Technology

AI and automation are creating a hybrid workforce

Illustration: Annelise Capossela/Axios

AI and automation are receiving a boost during the coronavirus pandemic that in the short term is creating a new hybrid workforce rather than destroying jobs outright.

The big picture: While the forces of automation and AI will eliminate some jobs and create some new ones, the vast majority will remain but be dramatically changed. The challenge for employers will be ensuring workforces are ready for the effects of technology.