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Chair Powell On Whether He Is Concerned With Fed Futures Pricing

FED
  • Q: Is the hard part yet to come on inflation from 6.5% to 2%?
    • A: I don't know, honestly. We expected goods inflation to start coming down by end-2021 and it didn't, all through '22. I would say this is not a standard business cycle where you can look at the last ten times there is was a global pandemic, and we shut the economy down, and Congress did what it did, and we did what we did. It is unique. It is just harder to forecast inflation. It may come down faster, it may take longer to come down. It is the early stages of disinflation.
    • In the case of the economy broadly in line w our expectations, it will not be appropriate to cut rates this year. Of course, other forecasts have inflation coming down much faster, that is a different thing. If that happens we will be seeing that and it incorporated into our policy thinking.
  • Q: Are you concerned about the Fed's outlook with Fed futures pricing?
    • A: I'm not particularly concerned about the divergence, because it is expected inflation will move down much more quickly. There are different participants that have different forecasts. But We have inflation moving down to somewhere in the mid-3s or maybe lower than that this year - we will update that in March. Markets are past that, they saw inflation coming down in some cases much quicker than that, we have to see. Given that, I don't see rates coming down. As I mentioned, if we do see inflation coming down much more quickly, that will play into our policy-setting, of course.
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