Powell Reiterates Fed ‘Not Confident’ Rates Are High Enough
Headed into Jerome Powell's speaking engagement on Thursday, some market observers (myself among them) suggested he'd do well to signal a bit of trepidation regarding the cross-asset rally witnessed in the aftermath of the November FOMC meeting.
Of course, no one expected Powell to explicitly reprimand traders or mention the S&P 500. Rather, some Fed watchers suggested he might simply reiterate the message from his remarks at an October event hosted by The Economic Club of New York. That me
As you anticipated yesterday in “Rally Risks,” Powell “typically doesn’t lean against the price action until it’s ‘too late’.” The Fed and Powell have become an ongoing clown show.
I have been puzzled by the persistent conviction, among many market strategists, watchers, and participants, including the rate futures market, that the Fed is going to start cutting in . . . well, in about three quarters from whatever the current quarter is. So currently 2Q-3Q of ‘24.
This seems equivalent to conviction that inflation will be back to, or nearly at and rapidly heading to, 2% . . . in 2Q-3Q ‘24.
If not, then it must be conviction that unemployment will be surging, banks failing, consumers breaking, and other hard landing indica . . . in 2Q-3Q ‘24.
But I don’t see much conviction in either of those things.
Totally agree. The idea the Fed would be looking to cut rates asap in the face of the worst inflation in two generations was and is…bizarre.
Consumer behavior is finally starting to change. Food companies are offering promotions & discounts again. And now even wealthier consumers around the world are stepping back from luxury goods. Perhaps they have, indeed, run down those “excess” savings enough to impact their spending?