A summary of the headlines from Fed Chair Powell’s press conference

Economic Outlook and Monetary Policy:

  • The unwinding of the pandemic effects make this cycle unique. We are still learning about how it plays out.
  • We may have underestimated balance sheet strength households, businesses. There can still be more of that than we think in terms of savings.
  • Don’t think there’s been a structural change in consumption.
  • Risks are getting more balanced on doing too much versus doing too little.
  • Until now, concern was not doing enough on rates. Now we are still trying to gain confidence in an appropriate stance.
  • In future, it may be that the labor market becomes more important for inflation.
  • Wages are not the principal driver of inflation so far.
  • September reading on employment cost index it was very close to internal expectations.
  • Wage increases have really come down significantly over the last 18 months.
  • We are focused on looking at data and giving ourselves a little more time now to parse it in order to decide policy stance.
  • Within a range of estimates of the neutral rate, and policy is restrictive.
  • The public believes that inflation will come down. That’s critical in winning the battle.
  • Inflation a door in a good place. There is no crack in that armor.
  • We are committed to getting inflation back down to our target, and we will.
  • Letting higher inflation expectations get embedded is a prescription for misery.
  • We’ve come far enough on policy that wrists are now more two-sided.
  • We feel like we are on a path to make more progress on inflation.
  • It may take some time for inflation to come down.
  • Inflation progress will come in lumps, be bumpy.

Interest Rates and Monetary Policy Tools:

  • We don’t have any reason to think these rate hikes are materially changing that picture.
  • We’ve been working a lot with financial firms to make sure they have good funding plans.
  • We would never look at long-term treasury rates in isolation; we look at them as part of a broader picture.
  • On new regulations, we will come to a package that has broad support.
  • Reserves are not even close to scarce at this point.
  • QT may be playing a relatively small role in rising longer-term rates.
  • We are not considering changing paystub balance sheet runoff.
  • Policy was restrictive, and we see it affects.
  • We are proceeding carefully.
  • We are close to the end of the cycle.
  • We have come very far with this rate hike cycle.
  • We are going to look at the full range of economic data, including financial conditions.
  • We are going meeting by meeting.
  • We are seeing elevated potential growth.
  • As we approach the next meeting, we will be talking about how we process the data.
  • We tried to be transparent in our thinking.
  • The efficacy of the dot plot decays during inter-meeting.

Inflation and Economic Impact:

  • High inflation is painful for people.
  • This has been a resilient economy.
  • See effects of higher rates on housing market, surveys on durables buying.
  • It can have implications on monetary policy.
  • We aren’t confident financial conditions are restrictive enough.
  • We are not confident yet we have achieved a sufficiently restrictive stance of policy.

Uncertainty and Future Policy Decisions:

  • This is one reason we have slowed the process down this year.
  • We have to make policy under great uncertainty.
  • Still very hard to say the length of lags of policy.
  • Supply side gains have really been helping, but those things will run their course.
  • I still believe and colleagues also that it is likely we will need to see slower growth, softening in labor market conditions.
  • That’s very welcome.
  • We have been very gratified that we’ve made significant progress without a spike in unemployment.
  • The best thing we can do for the U.S. is to fully restore price stability, with the least damage we can.
  • If we reach a judgment we need to tighten, we will.
  • We are attentive to an increase in longer-term yields.

This article was written by Greg Michalowski at www.forexlive.com. Source