Powell speaks on a BIS panel

Powell speaks on a BIS panel
  • Fed tools don't do much for supply constraints
  • High inflation will likely last well into next year
  • Supply bottlenecks are still weighing
  • If we see persistent inflation we would use our tools
  • We need to make sure our policy is positioned for a range of outcomes
  • We are on track to begin our taper
  • Inflation is well above target
  • We need to consider a full range of plausible outcomes on policy
  • We need to be patient but we are watching very carefully
  • It would be premature to raise rates
  • Expects that service side will get closer to normal as delta fades
  • Very possible we're at near or full employment next year

Powell is going to run the taper through Q1 and then make a call on rate hikes. The dollar is higher as he has begun speaking, perhaps the market was looking for a stronger pushback on inflation. These comments are similar to what he's said before, though the market might be focused on the comment that "high inflation will likely last well into next year."

Here's the main thrust:

"No one should doubt that we will use these tools to guide inflation back down to 2% over time. At the same time, we think we can be patient and allow the recovery to take place and allow the labor market to heal."

Update: The rally in the US dollar is continuing. I'm not so sure you can point to one comment or another but the flavor of them as a whole is clearly someone who is more worried about inflation and is leaning towards hiking soon after the taper ends. The faith in the transitory narrative is damaged. That's going to last for awhile.

What's interesting is that comments like this pull down long-end yields, suggesting there's a risk of hiking policy too soon as well.