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The Powell Doctrine
"My remarks will be shorter, my focus narrower and my message more direct," Jerome Powell said Frida
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“As for the peanut gallery, which unfortunately includes a bevy of former officials-turned paid pundits, I’ll confess to being uninterested. If they were in Powell’s shoes, they wouldn’t be as brave as they are on television. After all, most of them were involved in creating and perpetuating the edifice they now so readily disavow.”
The truest digital ink you have ever spilled.
+1
My summary (far from exact or verbatim, alas I took neither steno nor typing in school, and there’s only so fast that two fingers can peck) of Powell’s statement is below.
I counted only one sentence in eight minutes that was arguably dovish but it was sandwiched between two clearly hawkish sentences.
This was the performance he needed to deliver. Let’s hope he doesn’t give any interviews or Q&A today.
“Powell
Will make message shorter and more direct
Overarching goal to achieve price stability
Will take some time, require using tools forcefully
Will require sustained period of below trend growth
And softer labor market conditions
US economy slowing from 2021
Still strong underlying momentum
Labor market strong and out of balance
High inflation spreading through economy
Single month reading not enough
Moving policy stance to bring inflation down to 2%
Will not pause at longer run neutral
Said in July another 75bp increase possible
At some point will be appropriate to slow rate increases
Do not want to prematurely loosen policy
FOMC member projections are FF slightly below 4% through 2023
CBs can and should take responsibility for delivering price stability
Responsibility is unconditional
True that US inflation caused by demand and supply and Fed’s tools work on demand
Does not relieve Fed’s responsibility to reduce demand to met supply
Public expectations for inflation still anchored but not grounds for comfort
In 1970s public expectations for high inflation fed high inflation
Employment costs for controlling inflation increase with delay
Taking forceful steps to moderate demand
Will keep at it until job is done”
Powell did what he had to do. Now I will expect that he will raise the interest rate between 0.5% – 0.75%.