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FED: "Meaningfully" Restrictive, But In No "Hurry" To Cut (2/3)

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One key question coming into the meeting was whether Powell would provide any more color on how close the Committee saw rates as being to neutral.  He played this both ways, saying that they were "meaningfully above" neutral, but they weren't "in a hurry" to cut further: "you can't know with any precision... you know the neutral rate by its works... at 4.3% we're above pretty much everyone on the Committee's estimates of the longer run neutral. I think our eyes are telling us that our policy is having the effects on the economy.... I would say, we're meaningfully above it...having cut 100 basis points means that it's appropriate that we not be in a hurry to make further adjustments."

  • He said multiple times that he considered policy to be in a "very good place", noting that "policy is not highly restrictive, but meaningfully restrictive" after 100bp of cuts. Asked whether his assessment on restrictiveness had changed since the December meeting, he said "I don't think that my assessment really has changed. I mean, a couple of things have happened. We've gotten more strong data, but we've also seen rates move up at the long end, which could represent a tightening in financial conditions."
  • That said, "policy is meaningfully less restrictive than it was before we began to cut - it's 100 basis points less restrictive. And for that reason, we're going to be focusing on seeing real progress on inflation or turn at least some weakness in the labor market before we before we consider making adjustments." In one of the more key quotes of the press conference, he reiterated that "we feel like we don't need to be in a hurry to to make any adjustments."
  • Powell noted re longer-end yields moving higher despite Fed cuts could be attributed to rising term premia, and said it wasn't due to expectations about Fed policy or inflation - and that this could continue to restrain housing activity.
  • In his assessment of inflation, he reiterated that "we see a pathway" to get inflation down to 2%, noting a lack of concern over nonmarket services inflation, with housing services "coming down pretty steadily now". ("So you can look through all that and think, okay, that then we seem to be set up for further progress. But being seen to set up for it is one thing, having it is another.") He said "You are going to want to see inflation behaving in a way that builds confidence that we are really making progress."
  • Asked by MNI if a March cut was still "on the table", Powell appeared to downplay the possibility without dismissing it outright: "the broad sense of the Committee is we don't need to be in a hurry to adjust the policy stance."
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One key question coming into the meeting was whether Powell would provide any more color on how close the Committee saw rates as being to neutral.  He played this both ways, saying that they were "meaningfully above" neutral, but they weren't "in a hurry" to cut further: "you can't know with any precision... you know the neutral rate by its works... at 4.3% we're above pretty much everyone on the Committee's estimates of the longer run neutral. I think our eyes are telling us that our policy is having the effects on the economy.... I would say, we're meaningfully above it...having cut 100 basis points means that it's appropriate that we not be in a hurry to make further adjustments."

  • He said multiple times that he considered policy to be in a "very good place", noting that "policy is not highly restrictive, but meaningfully restrictive" after 100bp of cuts. Asked whether his assessment on restrictiveness had changed since the December meeting, he said "I don't think that my assessment really has changed. I mean, a couple of things have happened. We've gotten more strong data, but we've also seen rates move up at the long end, which could represent a tightening in financial conditions."
  • That said, "policy is meaningfully less restrictive than it was before we began to cut - it's 100 basis points less restrictive. And for that reason, we're going to be focusing on seeing real progress on inflation or turn at least some weakness in the labor market before we before we consider making adjustments." In one of the more key quotes of the press conference, he reiterated that "we feel like we don't need to be in a hurry to to make any adjustments."
  • Powell noted re longer-end yields moving higher despite Fed cuts could be attributed to rising term premia, and said it wasn't due to expectations about Fed policy or inflation - and that this could continue to restrain housing activity.
  • In his assessment of inflation, he reiterated that "we see a pathway" to get inflation down to 2%, noting a lack of concern over nonmarket services inflation, with housing services "coming down pretty steadily now". ("So you can look through all that and think, okay, that then we seem to be set up for further progress. But being seen to set up for it is one thing, having it is another.") He said "You are going to want to see inflation behaving in a way that builds confidence that we are really making progress."
  • Asked by MNI if a March cut was still "on the table", Powell appeared to downplay the possibility without dismissing it outright: "the broad sense of the Committee is we don't need to be in a hurry to adjust the policy stance."