Jerome Powell participated in a fireside chat on Friday at Spelman College in Atlanta, Lisa Cook’s alma mater.
His prepared remarks were parsed relentlessly by traders, both carbon-based and otherwise.
Powell described job gains as “strong” but “slowing toward a more sustainable level.” The slowdown, which he called “gradual,” is in part attributable to the Fed’s efforts to cool the economy in the service of restoring price stability.
Wage growth “remains high,” Powell said, before quickly noting that it too is “gradually” moderating to a pace that’s “more consistent” with 2% inflation. Real wage growth, he emphasized, is positive again.
He cited the six-month annualized pace of core inflation, which is now down to 2.5%. Recent disinflation is “welcome,” Powell said, but it “must continue” for the Fed to achieve its goals.
There was some nuance in how Powell described current policy settings. Rates are now “well into restrictive territory,” he said. That should be juxtaposed with the characterization of policy as “not too tight” during an October chat with David Westin. There’s nothing necessarily inconsistent about those two descriptions, but if traders are any semblance of savvy, they’ll pick up on the unspoken message.
“The full effects of our tightening have likely not yet been felt,” Powell went on, adding that the Committee is moving “carefully” at this point, given better balance between the risk of not doing enough and over-tightening.
Obviously, Powell had to retain the pretense of two-way policy risk. “We are prepared to tighten policy further if it becomes appropriate to do so,” he said Friday.
No one should construe that as incrementally more hawkish. Powell has repeatedly emphasized that the Fed isn’t confident that terminal has definitively been reached. Consider the following. At an IMF event on November 9, Powell said “We are not confident that we have achieved [a sufficiently restrictive] stance.” He said the same thing in Atlanta on Friday, but the language he employed was noticeably softer. “It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance,” he told the audience.
After the brief speech, Powell took questions, and he was due to speak again later Friday. Whatever additional soundbites emerge, the message is (or at least should be) clear: The Fed’s done. They’re not hiking again barring a significant turn for the worse in the incoming inflation data.
At one point during the Q&A at Spelman, Powell said a good inflation report is “as fun as it gets.”