Fed's Powell: I would be concerned by disorderly conditions
Comments from the Fed's Powell:
- Good reason to expect job creation to pick up, the US is still down 10m jobs
- We expect inflation to pickup on base effects and a surge in spending
- Question is: Whether will inflation be transitory?
- It's unlikely that deeply ingrained low inflation expectations will fade fast
- There is a lot of ground to cover, we want higher wages
- We have a high standard to identify maximum employment
- Bond market rates moved up. A number of factors are part of that but we think that we're a long way from our goals. I would be concerned by disorderly conditions in the bond market.
- There's good reason to think the outlook is more-positive at the margin
- It will take 'some time' to make substantial further progress (this is a repeat)
- If we do see a transitory increase in inflation, I expect we will be patient
- I would be concerned by disorderly conditions or a persistent tightening in conditions that threatens our goals
- The rise in rates caught my attention
Powell has been repeatedly pressed on interest rates and has stuck to the same script as Brainard. He's not going to offer any more. The rates market doesn't like it and US 10-year yields have risen above 1.50%, up 2.6 bps on the day.
- Guidance of tapering has some judgement in it but we will communicate
- We're not looking to surprise people
- Rate liftoff guidance is pretty specific, it's going to take some time to get there, it's a picture of an economy that's all but fully recovered
- "4% would be a nice unemployment rate to get to, but it will take more than that to get to maximum employment."
- Presumably in the next few months we'll see strong employment
- We think our current policy stance is appropriate
- Lesson from covid is attack quickly and don't hold back
- Second lesson is don't stop until the job is really done
- Disinflationary pressures are not going to go away quickly
- We're well aware of the history of high inflation, we won't allow it