Powell Doesn't Fully Convince On Higher Rate Outlook Reasoning (1/2)

Powell's press conference was dovish in the sense that he didn't really hammer home the 50bp higher 2024-25 rate Dot medians that triggered the initial sell-off when the meeting materials were released.

• But looking under the surface: while his comments that the Fed would tread "carefully" were taken dovishly, this was basically just what he said at Jackson Hole. And much more hawkish is the apparent shift in the broader committee on rates that underlies the Dots, and an less clear reaction function evidenced by the interplay between the projections and the rate medians.
• Powell didn't have a great explanation for why the Dots moved up at all at this meeting. Of course he again emphasized that the Dot Plot is not a central Fed forecast, but he usually has at least a good prepared explanation. Even the lowest 2024 dots were 80bp higher than in June and one member sees rates moving yet higher in 2024 to above 6%.
• That seems at odds with the increasingly optimistic commentary by FOMC participants in the past few weeks as the jobs and CPI data have come in, so it will be very interesting to hear what individual members say about the state of play in the coming weeks. One has to think that part of it is a coordinated effort to show that the Fed means to keep rates higher for longer and not inadvertently send a dovish message.