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The Federal Reserve raised rates by a 75 bp at their June meeting. The market was pricing in an 87% chance of a 75-basis point hike with the balance o
[See the full post at: Federal Reserve Largest Raises Rates Most Since 1994, Up 75 Basis Points as Expected]Powell opening statement:
Inflation is much too high
It is essential we bring down inflation down
Consumption spending remains strong
Growth in business fixed investment is softening
Housing is slowing
Tightening in financial conditions could continue to temper growth
Labor market has remained extremely tight
Wage growth is elevatedMore Powell
We expect labor supply and demand conditions to come into better balance
Notes that projections for unemployment over the next two years have moved up
Since Fed’s May meeting, inflation has surprised to the upside; in response to that, we decided to hike 75 bpsPowell Q&A
By this point we’d been expecting to see signs of inflation at least flattening
We got CPI and data on inflation expectations and shifted
We thought strong action was needed at this meeting
We decided we needed to do more front-loading
The next meeting could well be a decision between 50 bps and 75 bps
Repeatedly cites a ‘more normal range’ rather than ‘neutral’
Policymakers would like to see rates at a modestly restrictive level at the end of this year
He has shifted from ‘neutral’ to a ‘more normal’ range now rather than and caveated that with data dependence.Fed’s George was the only Fed who dissented on the 75 bps move
“The speed with which we adjust the policy rate is important,” she said, warning that “abrupt changes can be unsettling to households and small businesses.”
Looking ahead, she said the case to continue hiking is “clear cut” and that inflation is showing no sign of decelerating so I don’t think there are any real policy takeaways here.
Philly Fed President on Yahoo Finance
If demand softens, 50 bps for July may be good
We need to get to 2.50% and quickly
75 bps helps us to get to neutral stance
We should be above 3% by the end of the year
No ready to decide on 50/75 for July 27 meeting
If demand softens, 50 bps for July may be good
We’re starting to see signs of softening demandThe Fed is at 1.50-1.75% so getting to 2.50% might only be one meeting away.
The market continues to price in a terminal top near 3.75%.FOMC minutes of the June 14-15 FOMC meeting
Participants ‘concurred’ that inflation outlook had deteriorated
High inflation warranted restrictive interest rates
Most participants saw downside risks to growth, including the possibility that Fed hikes have a larger-than-anticipated impact
Saw possibility of ‘more restrictive’ rates if hike inflation persisted
Judged increase of 50 or 75 bps would likely be appropriate in July
‘Many’ participants judged there was a significant risk higher inflation could become entrenched if public questioned the Fed’s resolve
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