Powell speaks at the Council on Foreign Relations:
- Many on FOMC see stronger case for more accommodation but also do not want to overreact to individual data points or short-term sentiment swings
- Solid fundamentals are supporting continued growth, strong job creation
- Unemployment is low, the economy is growing and inflation is near the Fed's objective
- Although inflation is running somewhat below target, 'we have expected it to pick up'
- Businesses and agricultural contacts have reported heightened concerns over trade developments
- FOMC's baseline outlooks remain favorable against backdrop of heightened uncertainties
- Repeats that the Fed to closely monitor information and act as appropriately
- Things have changed 'significantly' since May 1
- The question we're going to have to ask is: 'Will these uncertainties continue to weigh?'
- The US consumer has been very solid, which makes a tonne of sense
- We've seen weakness in manufacturing around the world
- We're looking for sustained changes in financial conditions
- So much of what happened came in a few weeks before the last meeting
- If you see weakness in the economy, it's a good practice in a low-rate world to come in earlier rather than later
- Undershoot in inflation looks like it might be more persistent
- Breakevens dropped 'rather sharply' during the past inter-meeting period
- Says he takes seriously the market's tepid inflation expectations and sees it as argument for lower rates
- We're not looking at short-term conditions in financial conditions
My read is that these comments also aren't as dovish as expected. There's nothing here to lead me to believe a 50 bps cut is on the table in any meaningful way. Yes, we still have 5 weeks to go but it doesn't look like Powell is hitting the panic button.
"I think it's widely understood that the U.S. federal budget is not on a sustainable path, and I think that this is a good time to be working on that, when the economy is strong," he said. Then why are you cutting, Mr Chairman?
