Heisenberg Report

Powell Delivers Acceptable Performance In Zurich: Highlights

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.