Jerome Powell’s in Sintra this week hanging out with his global counterparts at the ECB’s annual resort summit.

That’s your tax dollars at work folks: Sending a wealthy investment banker on vacation to Portugal.

I’m just joking. Jay’s the kind of guy who’d pay for his own trip if you asked him to. If we’ve learned anything about Powell over the past half a dozen years it’s that, Elizabeth Warren’s caricatures aside, he’s not a bad guy. Really he’s not.

Anyway, Sintra’s a big deal. It’s not quite Jackson Hole, but it’s a premier event. If you wanted to, you could say something to shift the policy narrative. Powell didn’t. He said a lot on Tuesday, but nothing that’ll prompt traders to reassess the outlook in a meaningful way.

Inflation in the US is now showing signs of resuming the disinflation trajectory, he said, referencing the last two CPI releases and a commensurately benign read on PCE price growth late last week. Still, the Fed wants to be confident that inflation’s on the right path. Policymakers want to see additional data before they decide to brave a rate cut.

If the US labor market were to exhibit “unexpected” weakness, that too could prompt a cut. The risks are two-sided now, and the Fed knows that, Powell remarked.

Services inflation’s still stubborn and there’s a link to wage growth. But the labor market’s moving into better balance and some services sector inflation is attributable to a “catch up” effect, Powell mused. In any case, the Fed’s making “real progress.” Policy’s restrictive, and you can see it in the housing market.

As far as fiscal policy, that’s a job for politicians. “Elected people.” The Fed’s not supposed to dabble in politics and it doesn’t, Powell insisted, noting that there’s “broad support” for independent monetary policy. The context, obviously, are Donald Trump’s allusions to rolling back Fed independence in a hypothetical second term which seems to get more likely by the week, if not by the day.

Powell suggested, as is his wont, that US fiscal policy’s probably not sustainable. America’s running large deficits at full employment, and the nation’s debt burden should be a “real focus” in the years ahead.

On the neutral rate, he stuck to his own script. R-star’s not especially relevant for near-term policymaking and besides, the Fed’s “getting what it wants” with current policy settings. (Write your own jokes.) The r-star debate, Powell said, doesn’t dictate how restrictive policy is.

I won’t litigate that point again. In two words: He’s wrong. The term “restrictive” has no meaning outside of the neutral debate. Restrictive relative to what, exactly, if not neutral?

Powell said the Fed would be happy if the unemployment rate stayed right where it is. Although 0.6ppt higher versus the cycle lows, a 4% UNR would be described as something close to full employment in any other historical context. Powell went on to say he sees inflation “in the mid- to low- twos” a year from now.

If you were wondering, the Fed’s not using generative AI. Not yet anyway. Maybe they should try it. I hear good things. And the bar to clear for better results in this context is pretty low.

As for AI’s potential, Powell said you can feel “something big coming.” He also commented on cyber attacks, which he described as “the stuff” that keeps people awake at night.