Jerome Powell’s remarks at a moderated discussion in Zurich went off ok on Friday, following a jobs report that suggested the labor market is cooling, even as a close inspection revealed some bright spots.
The Fed chair has a penchant for repeating (almost verbatim) recent talking points, perhaps because going off script risks a communications misstep that could trigger market turmoil or invite an angry tweet (or five) from Donald Trump.
“Today’s jobs report is consistent with a solid labor market”, Powell said, in the course of reiterating that the US economic outlook “remains stable”.
Read more: Jobs Report Misses, Wage Growth Comes In Hot
He proceeded to parrot the usual lines about the Fed “acting appropriately to sustain the expansion” and being committed to “using our tools to support the economy”.
The Fed chair insisted that the FOMC is “very committed” to defending the 2% inflation target, and described business investment and manufacturing gauges as “sideways to slightly down”. ISM manufacturing of course slid into contraction in August for the first time in three years, data out Tuesday showed. “We shouldn’t let inflation fall too far below target”, Powell remarked.
In a comment that will surely draw cat calls from the hard money crowd, Powell contended that “we don’t have groupthink on [the] FOMC”.
He also said policymakers are not forecasting a recession. “Our main expectation is not at all that there will be a recession”, he emphasized, adding that the US consumer is “in good shape”.
That’s good news for the White House’s economic narrative, but a familiar tension persists. If the Fed continues to see the US economy as being on firm footing, aggressive rate cuts aren’t likely, and neither is a wholesale relent to pressure for the committee to confirm the onset of a prolonged easing cycle.
A Wall Street Journal trial balloon floated reasonably well on Thursday, as stocks surged despite a clear indication from the Journal’s Nick Timiraos that the September cut will be 25bp, not 50.
Powell described trade policy as a factor that contributes to uncertainty and makes things “murky”, and he identified “lower neutral rates and lower inflation” as the two biggest problems facing central banks.
As far as that “other” problem is concerned, Powell delivered the boilerplate line: “[It] would be simply wrong to take politics into account”, he said.
You seem to have missed the part of his comments where he said that central banks have very little ammo left to fight any type of a downturn because interest rates are already so incredibly low.
i mean, that’s self-evident. it’s a truism. we’ve written hundreds of posts on the ammo problem
True but I listened to the entirety of his comments and the one thing that the bubblehead press completely chose to not mention afterwards were his comments that the fed has little ammo left to fight s downturn. I don’t like Peter Schiff ‘s politics but he is 100% right that the fed has already monetized the almost $3 trillion balance sheet and also the fact that rate cuts here won’t do anything.
While I’m on the subject of limited coverage, I don’t understand why nobody ever mentions, other than Steve Leisman once a few months ago, the fact that affiliates and subsidiaries of American companies in China earn well over $350 billion a year in China that doesn’t count towards the balance of trade. If you take that into account the United States actually has a trade surplus with China and not a deficit. This entire current situation is based on a giant populist scapegoating lie.
Oops. Almost $4 trillion balance sheet. Not $3 trillion…
“This entire current situation is based on a giant populist scapegoating lie.”
well that’s certainly true. that applies across the board
Yeah , but they did not hear the first two hundred mentions and it is worth repeating it being true…..
At least the head of Canada’s central bank, Poloz, resisted the ‘me too’ movement of too many central banks and remained politically independent and data dependent.
Meaning Canada didn’t drop rates when the Bank Governor gave his update this week. Nice to see sanity prevail.