Powell QA Sept 21 2022
  • So far there's only modest evidence that the jobs market is cooling off
  • Our focus is getting inflation back down and we think we'll need softening in the labor market
  • We want to see clear evidence inflation is moving back down to 2%
  • Before cutting rates we want to be very confident inflatino is moving back down to 2%
  • It's likely to take some time to see the full effects of changing financial conditions on inflation
  • There's still a ways to go on rates
  • We've just moved to the 'very lowest level' of restrictive
  • We see the current situation as outside of historical norms
  • We do see some evidence of supply shocks abating, inflation in commodities coming down
  • The chances of a soft landing are likely to diminish if rates need to be higher
  • Despite recession risks, we're determined to get inflation under control because the alternative is much worse
  • We believe rate needs to put meaningfully downward pressure on inflation but we know there are long and variable lags
  • Median sees 125 bps in hikes for year end but significant group sees 100 bps. We didn't make that decision today
  • Core inflation is not where we need it to be
  • We can't fail to get inflation back down to 2%
  • There are still significant savings on people's balance sheets
  • We haven't given up on the idea that we can have a relatively modest increase in unemployment while bringing inflation down
  • "We have got to get inflation behind us. I wish there were a painless way to do that. There isn't"
  • Shelter inflation may take some time to come down. You have to assume it will stay pretty high for awhile

The US dollar has completely reversed and US equities are now around 1% higher.

I think the real tell is that the peak dots of any Fed forecaster are at 4.75-5.00%. That is essentially a cap on Fed hikes.