Dovish Jerome Powell Walks It Back And The Market Loves It

Here comes Jerome Powell.

In this week’s main event, the not-so-vaunted Fed chair (if you go by Donald Trump’s assessment of Powell’s performance) is on the tape with what appear to be dovish comments on a quick read.

“There is no preset policy path [and] we will be paying very close attention to what incoming economic and financial data are telling us”, Powell said, in prepared remarks delivered at the Economic Club of New York.

On rates, Powell looks like he might be trying to “correct” the “long way from neutral” boondoggle that got markets into trouble in October.

“Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy — that is, neither speeding up nor slowing down growth”, he said.

“Just below” is a “long way” from “long way from neutral” (pardon the pun).

Powell goes on to reiterate that he’s aware of the two-way risks and that the gradual pace of hikes is meant to balance those risks. Moving too quickly would risk slamming the brakes on the expansion, while getting behind the curve obviously risks an unpalatable rise in inflation and, of course, “destabilizing financial imbalances”, Powell says.

In a soundbite that some folks will likely key on, Powell says the effects of gradual hikes are “uncertain” and it could take “a year or more” for those effects to be known.

His assessment of the economy also sounds toned down. Powell says there’s “a great deal to like” about where things stand. That contrasts with previous characterizations that bordered on euphoric.

The reaction from markets: Dovish.

(Bloomberg)

This is what folks have been waiting on, and it looks like Powell delivered.