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Powell Plays It Down The Middle, Keeps December A Live Meeting

FED
FOMC communications ahead of the November meeting set it up as a placeholder for the December decision - and that's what we got today, with Powell sticking tightly to the script from his Oct 19 speech and Q&A. A few thoughts on a quite balanced Powell press conference:
  • Reiterating once more that the FOMC is in a position to proceed "carefully", his main task today was to maintain the tightening bias without overdoing it too much and emphasizing that the FOMC only discussed today's decision without eyeing a hike or a pause in December, let alone discussing rate cuts in future.
  • The FOMC sees policy as restrictive but aren't yet confident given incoming data that they've reached a stance that's sufficiently restrictive to bring inflation down to target. They're still focused on the question of how high to go, and not yet on the question of how long to remain there. That said, as he's noted before, the risks of doing too much tightening are becoming more balanced with the risks of doing too little.
  • Powell noted the September Dot Plot a couple of times - while he said it was naturally stale after several weeks, he noted that it suggested "you are close to the end of the cycle". Again, implying a tightening bias by reminding that a hike is still loosely penciled in, but not overplaying it. December is still live.
  • Financial conditions were a central focus of this press conference: his two stated criteria for assessing the impact of higher long-end yields are a) whether they are persistent and b) whether they reflect Fed hiking expectations. And "In terms of how to think of the translation into rate hikes, I think it is just too early to be doing that."
  • Powell brusquely dismissed any suggestion that the FOMC is considering changing QT policy - especially given that it's "hard to make a case that reserves are even close to scarce".
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