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‘Failure Isn’t An Option’: Powell Says Fed To Prevail Over Inflation
"Clearly, this is an unusually large" rate hike, Jerome Powell said, while speaking to the media following the Fed's most aggressive policy rate increase since 1994. Increments of 75bps won't likely "become common," he remarked.
And yet, Powell was quick to note that another 75bps increment will almost surely be on the table at next month's meeting. Policymakers, he reiterated, want to see a "series" of monthly declines in the incoming inflation data.
"Why not go for a full percentage point?"
I thought Powell did a pretty good job in this press conference, in the sense that he was about as clear and straightforward as a Fed chair can realistically be.
Of course he can’t outright say the Fed is prepared to slow the economy into recession as its only hope of controlling inflation, but his comments about being unable to affect the supplyside yet responsible for headline inflation meaning that they have to reduce demand and a soft landing will be challenging – makes it quite clear.
Also of course he can’t outright say the next move will be 75+, but his comments about wanting to see a series of declines in MOM inflation and 75 being on the table – again, it is pretty clear that if inflation doesn’t cooperate with alacrity then look for 75.
So, 150-175 now, next meeting in Jul, then none until Sep, and then none until Nov but Fed will try not to do anything big in election month . . . if inflation stays hot, seems like Jul will have to be 75 or 100 with another 50+ in Sep? To end the year at least 300?
H-Man, trying to remember how many times he said “that is beyond our control”. Seems like he is looking for a hedge if things don’t turn out well. Meanwhile this is beginning to look more and more like that worn out analogy about boiling frog. So if 75 wasn’t on the table at the last meeting, I must assume 100 is on the table for the next meeting. So is 100 the new 75?
Good point at the end, but also scary. This is what poor communication entails, and it’s also best policy in practice for government work…
The rally after the announcement surprised me. Maybe they see things differently than I do. Maybe I’m a “glass half-empty” guy. I know I’m a guy holding a lot of cash and very few stocks. Right or wrong, I’ll hold off for a while.
The rally was in response to the fed taking action (personally I did expect it). I think the fed did a good job and leaking the news early prepared everyone. However, from a macro perspective, increasing interest rates is still negative for the bond markets and equities, so I doubt any rally will last until interest rates and inflation are stabilized.
So I open Bloomberg and read the below. Bizarre.
“Regardless, traders took Powell at his word that three-quarter-point hikes won’t be “common.” Swaps showed that a full 75-basis-point move at July’s meeting was priced out in the aftermath, while Barclays Plc shifted its forecast for the central bank to return to a half-point increase next month.”
https://www.bloomberg.com/news/articles/2022-06-15/stock-rout-takes-breather-on-fed-vow-big-hikes-won-t-be-the-rule
I thought Jay Powell handled today’s tough presser very well.
I also think we’re f***ed for a while.
Perhaps this will be called “The Great Reset” (?)