Powell Q&A: It is important that financial conditions reflect policy restraint in place

• We are not yet sufficiently restrictive on rates
• Our focus is not on short-term moves in financial conditions
• Our focus is on sustained changes to broader financial conditions
• It is gratifying to see the disinflationary process now underway
• Fed doesn't yet see disinflation yet in core services
• At March meeting we will update our assessment for the rate hike path but we still think there's work to do, we haven't made a decision about where exactly rates need to be
• If data is strong, we could go higher, if data is weaker we could stay lower. Will be data dependent
• It's very difficult to manage the risks of doing too little. If you find out you did too little and it's six or nine months later then there's a risk to inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term expectations
• If inflation comes down too fast, we have tools that can fix that
• We have core services inflation that's not showing disinflation
• It would be very premature to declare victory on inflation
• "We can now say for the first time that the disinflationary process has started"
• We don't see inflation easing in core services ex-housing "we don't see it yet"... "I think we will fairly soon."
• We have no incentive or desire to over-tighten
• Policy is restrictive, we're trying to judge about how much is restrictive enough
• "We're talking about a COUPLE of more rate hikes to get to that level we think is appropriately restrictive."
• "My view is that you're not going to have sustainable return to 2% in core ex housing sector without increased labor slack"

The market reversed when he was asked about financial conditions. He pushed back against financial conditions (which is pretty much a code word for stock markets) but not as hard as he could have. The market has taken that as a green light.

The line on the disinflationary process starting will be the main headline from this meeting.

The labor debate is also going to be ongoing because right now the economy looks fine and there aren't a lot of layoffs. Can inflation get back to 2% with unemployment at 3.5%?