Powell Leans Slightly Dovish Overall (2/2)

But if you look past the question of the pace of hikes, which was really the only possible answer for a true meeting-by-meeting perspective (and probably required given internal FOMC divisions) the presser leaned slightly dovish.

• While Powell predictably downplayed the June CPI report, he reiterated several times that they were seeing progress, for instance in labor market supply/demand.
• He also played up the potential impact of tighter credit conditions (which was not a given today, considering how the banking sector appears to have held up well, and seemingly greater discomfort among FOMC hawks about their decision to agree to a June pause) as a consideration in policy.
• Perhaps the Senior Loan Officer Survey that the Fed saw in advance at this meeting was weaker than Powell let on.

More hawkish were Powell sounding the usual notes about "higher for longer" ("we think we're going to need to hold policy at a restricted level for some time and we need to be prepared to raise further if we think that's appropriate.")

• And he certainly didn't back off of the SEP projections for one further hike this year. The shift in statement language on economic activity reflected the staff's new non-recession forecast, which is marginally hawkish, but he saw it in the context of a soft landing remaining possible.

Some pointed to his comments that the Fed would stop raising and start cutting "long before you got to 2% inflation", as hawkish - "because we don't see ourselves getting at 2% inflation until 2025 or so".

• But that's just the June SEP inflation projection (headline PCE 2.1% by Q4 2025), and Powell is clearly saying that they WILL be cutting long before that. Indeed he also said "many people wrote down rate cuts for next year. I think the median was several for next year. That's just going to be a judgment that we have to make then a full year from now."