Federal Reserve Raises Rates 25bps as Expected, Inflation has Eased Somewhat but Remains Elevated

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  • #49348
    TradersCom
    Keymaster

    Powell opening statement:

    “The inflation data in October and November show a welcome reduction. But it will take substantially more evidence to give confidence that inflation is on a sustained downward path.”

    Without price stability, there is no sustained strong jobs market
    US economy has slowed significantly from last year
    We’ve covered a lot of ground, full effects of tightening yet to be felt
    Higher rates appear to be weighing on business investment
    Labor market remains extremely tight
    Inflation remains well-above long run goal of 2%
    It will take ‘substantially more evidence’ to give confident that inflation is on a sustainable downward path
    Participants still see inflation risks as to the upside
    Stable inflation expectations aren’t grounds for complacency
    We are seeing the effects of higher rates in the most-sensitive areas like housing
    We still have “some ways to go” on rates
    We will stay the course until the job is done
    Historical precedence argues against loosening prematurely

    #49351
    TradersCom
    Keymaster

    Powell Q&A:

    Expectation is that services inflation will not move down quickly so we’ll have to raise rates higher
    Non-housing related services inflation will take a substantial period to get down
    4.7% unemployment would still be a strong labor market
    Appropriate thing to do is slow pace of hikes, will allow us to ‘feel our way’ but won’t say whether 50 bps or 25 bps
    Need to see non-housing services sector “get into better balance”
    “It’s now not so important how fast we go … It’s far more important to think what is the ultimate level, and then at a certain point the question will become how long will we remain restrictive.”
    Key line:

    “I wouldn’t see us considering rate cuts unless there’s confidence that inflation is moving down to 2%.”

    #49352
    TradersCom
    Keymaster

    Markets recovering as #Powell presser moves along … “Fed Isn’t Considering Changing Inflation Goal” says Powell”
    $ES_F Futures now 50 handles up from day’s lows P&D’s Put sellers collecting $VIX down 100 pips from days high Update

    #49340
    Helmholtz Watson
    Participant

    The Federal Reserve raised rates by 25 bp to a target range of 4.50-4.75% in unanimous vote at their February meeting as expected. Market Fed futures
    [See the full post at: Federal Reserve Raises Rates 25bps as Expected, Inflation has Eased Somewhat but Remains Elevated]

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