Powell washington Feb 7 2023
  • Labor market is extraordinarily strong
  • Sometimes just I get data the night before it's released, but just me
  • Message from last week's FOMC is that disinflationary process has begun but has a long way to go
  • Repeats that ongoing rate increases will be appropriate, still have not reacted sufficiently restrictive level
  • Vote on monetary policy takes place around noon on the second day of FOMC
  • My guess is that it will take this year and next year to get down to 2%
  • There is now a shortage of workers in the US and 'it almost feels structural'
  • The labor market is 'at least' at maximum employment
  • Notes that he has regular conversations with most major central banks
  • The biggest challenge we face at the Fed is completing the challenge of getting inflation back to 2%
  • Repeats that they're not seeing deflation in core services and that they will need to keep rates high to do it
  • We're not seeing disinflation in housing but expect to see that happen
  • Wants to see disinflation in core services ex-housing, says that's what he worries about
  • We still expect that the labor market will soften
  • The reality is that we're going to react to the data, if we get stronger data, we could raise rates higher than we expect

The market likes what it has heard so far with stocks rallying to session highs, led by the Nasdaq . The US dollar has sunk across the board.

The fear was that he would offer up some more-aggressive guidance and start to talk about rates getting close to 6%. He certainly didn't take that off the table but there's no big hawkish shift here and that's what the market is responding to.

Update: The bolded comment near the end of the speech sapped some of the initial moves.