Powell Wishes He Could Wish Away Inflation. Alas…

The Fed has reached the lowest level of restrictive policy, Jerome Powell said Wednesday, during remarks to reporters following a third consecutive upsized rate hike. Although officials eschewed the temptation to raise rates by a full percentage point, fresh projections tipped an aggressive near-term policy path, and updated estimates for economic aggregates showed the Fed is indeed willing to countenance meaningfully slower growth and higher unemployment in pursuit of price stability. Powell'

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13 thoughts on “Powell Wishes He Could Wish Away Inflation. Alas…

  1. Hard to spin that FOMC meeting bullishly.
    1. Effectively brought back forward guidance.
    2. That forward guidance for 2023 includes UE up to mid-4s%, GDP growth down to barely 1%, core PCE inflation still over 3%, policy rate 4.6% and up from 2022.
    3. Picture is Fed expects it will take better part of years to control inflation, so easing is more than a year away.
    4. Press conference had Powell reiterating Jackson Hole message, explicitly calling for falling housing prices, explicitly saying that UE pain will be unavoidable, and ending Q&A early.
    5. Only non-hawkish statement was that MBS sales are far off.

  2. It is only down from here until year end, growth data will likely deteriorate fast and the last two hikes, even if 50 bps each, will break the camel’s back, it will be a 2018 redux, unless the war in Europe spreads and escalates, which seems more likely by the day, in that case it will be a 2008 redux, if we are lucky.

  3. H-Man, with core at 6.3%, the fed rate has to be higher as in all other inflationary periods in the last 50 years; so assuming core falls to 5%, we need terminal at 5.25% to continue to force inflation down. We are not close.

  4. Currently, fiscal policy at both the Federal and state levels is working against monetary policy. This is ridiculous.
    Fiscal policy needs to be adjusted to increase (not decrease) the supply side where needed- such as workforce, housing, oil, etc. November elections in the US might result in a situation where fiscal policies are appropriately supporting, not working against, monetary policies.
    This is a global problem in wealthy countries- I am currently traveling in Australia and there are worker shortages everywhere. Our 26 year old, college educated, waitress tonight was an Irish girl who had come to Australia on a work visa. She was given a choice of working on a farm or as a waitress for 88 days and in exchange will be able to stay in Australia for 2 years. She said her opportunities are much better in Australia, and she has already convinced friends from home to follow her. In the US, we need to deal with our ineffectual Immigration policies asap. We should be actively seeking to get the best and brightest before they go to other wealthy countries.

    With 8B people on the planet, there are plenty of workers- we just need to get them to the correct spots (and provide some training) to fill job openings.

    1. That is a good idea. However, due to the sentiments of a rather large, arrogant, loud and vociferous segment of the public here in the USA, that idea would only gain traction if the only immigrants allowed to gain entry into the United States were: (1) blond, (2) tall (3) slender (4) blue-eyed (5) and shall we say of Caucasian?, Arian? or Northern European descent?, and decidedly only those who espouse strong Christian religious views, and hence – strongly anti-Semitic or extremely anti-Muslim, etc.

    2. There is no chance of fiscal anything under a GOP Congress, let alone any sort of policy that entails encouraging immigration. I think quite a few old guard Republicans and/or Indepedents and/or fiscal conservatives who don’t necessarily espouse a strong party affiliation are in denial about where the Republican party’s priorities are in 2022. The agenda is to commandeer state legislatures, roll back secularism on all fronts and push the country towards a radical libertarianism. It is all about the culture wars. All about the culture wars.

  5. Aryan – that’s funny. Aryan is a term used by two classic ancient Indo-Iranian ethnic groups. In Iran itself it was used in the Avesta scriptures to describe homeland (expanse of Aryas) where the Aryans wouldn’t have to deal with the “outsiders.” Of course, the term was later co-opted by the Nazi’s…

  6. FWIW-from the 2020 US census, as a percentage of total population:
    White – 59.7%
    Black- 12.5%
    Hispanic- 18.7%
    Asian- 5.8%
    Multi- 2.3%
    Other – 0.9 %

    Here is what the US census projects we will look like in 2060:
    White- 44.3%
    Black – 13.6%
    Hispanic – 27.5%
    Asian- 8.9%
    Multi – 4.9%
    Other – 0.9%

    The Millennials and following generations can largely embrace this because they have experienced this and have friends across cultures.
    As older generations die off- our country will have the opportunity to be more cohesive.
    “Get on board, people”- this train has left the station.

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