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Points Of Discussion For Powell Today

FED
A few potential questions Powell could face at today's post-meeting press conference, outside of the rate decision and guidance for July and beyond:
  • Financial conditions: In December 2022 you said that over the course of that year "financial conditions have tightened significantly in response to our policy actions" and that it was "important that, over time, they reflect the policy restraint that we are putting in place". Since then, while we have seen stress in the banking sector, most indices of financial conditions and stress are at the same level or looser, and equity markets have returned to levels seen near the beginning of the hiking cycle. Overall, have financial conditions adequately reflected your policy restraint, and are they consistent with a return of inflation to the 2% target?
  • Recession expectations: Does the updated Summary of Economic Projections reflect an expectation of a recession by the median participant? Does the Fed staff still expect a recession? Has the probability of achieving a "soft landing" increased or decreased in your view since the last set of projections in March?
  • Housing: Two Federal Reserve governors (Bowman and Waller) have commented since the last meeting that a rebound in the housing market is raising questions about how sustained will be the lower rent increases that you expect. Do you and the wider Committee share this concern?
  • QT and the TGA: Treasury's current plan to rebuild cash holdings via massive bill issuance will put downward pressure on bank reserves and the overnight reverse repo facility. Some observers suggest that reserves could become scarce later this year. Has the Committee discussed how this might affect balance sheet runoff policy, and would the Committee be prepared to slow or stop runoff later this year if signs of scarcity were starting to emerge? Has the Committee considered making changes to the ON RRP program to mitigate reserve drainage, including limiting takeup by individual institutions?
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