Talking Points
"We have more work to do," Jerome Powell declared Wednesday, following another rate hike from the Fed, which downshifted to a 25bps hike cadence, consistent with market expectations. Powell said the Committee needs "substantially more evidence" to be comfortable that US inflation is on a sustainable path lower.
He acknowledged the possibility that the impact of last year's hikes hasn't yet fully worked its way through to the economy. Naturally, that raised questions about how officials can be s
Interesting that Powell says financial conditions are tight vs street measures of FCI that are loose.
I saw the Fed’s language as just a little soft, overall.
I think the Fed’s language will lead to several months of inflating asset prices (eg equities and housing). Additionally, reductions in inflation, in labor rates and cost of goods, are likely to evaporate entirely.
Inflation may not be roaring higher, but to think that this statement from the Fed, will do anything to lower it further, is dubious.
Although there are two more quarter point hikes coming, for all intents and purposes, the Fed has signaled a pause. Pretty much nothing will happen for three months (or more) while the Fed evaluates further data.
If the Fed is going to get tough again, it won’t happen until June at the earliest.
Equity markets and housing prices, probably drift higher now. I don’t know if that was Powell’s intention, but that will be the effect.
Why he didn’t use the opportunity to be just a little tougher, I don’t know. Are there problems under the hood that we don’t know about?
I sometimes wondered whether there is some degree of “stealth” QE present, even while they claim to be doing QT.
Certainly the war in Ukraine and the lack of debt ceiling agreement, cannot be making Powell’s job any easier.
Hope is not a strategy, it sounds like his strategy.