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Chair Powell Begins January FOMC Press Conference

FED
  • Powell opens with the usual language on the focus on the dual mandate etcetera.
    • Inflation has eased from highs without significantly increased unemployment. That's very good news, but inflation is still too high, the path forward is uncertain.
    • Policy rates are well into restrictive territory, having effect on activity and inflation.
    • Risks to dual mandate are moving into better balance.
  • Powell moves to the economic situation and notes scope for rate cuts later this year:
    • Economic activity has been expanding at a solid pace, bolstered by strong consumer demand; housing activity has been subdued; high interest rates appear to have weighed on business investment.
    • The labor market remains tight but supply/demand coming into better balance. Strong job creation has been accompanied by an increase in the supply of workers, and immigration has returned to pre-pandemic levels. Nominal wage growth has eased, and vacancies have declined. Demand still exceeds supply.
    • Inflation has eased notably but remains above target. The lower inflation readings over H2 2023 are welcome, but we will need to see continuing evidence to be confident that inflation is moving down sustainably toward our goal.
    • "We believe that our policy rate is likely at its peak for this tightening cycle, and that if the economy evolves broadly as expected it will likely be appropriate to begin dialing back policy restraint at some point this year."
    • But "The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%. We will continue to make our decisions meeting by meeting."
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