Reply To: Central Bank Watch – Eyes on Fed Speakers and CPI


Fed’s Powell in a conversation hosted by the Economic Club of Washington

Tuesday, 07/02/2023

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