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Powell Presser Highlighted Uncertainty Of Credit Tightening Impact (1/2)

FED
A few items of note from Powell's press conference:
The FOMC had considered pausing in the days before the meeting, but there was "strong consensus" for a 25bp hike with recent data coming in stronger than expected.
  • Powell described the banking sector turmoil as being at a "small number of banks" and "isolated", with the authorities able to handle it in the first instance. But the FOMC was still concerned about the broader macro impact, with it both too soon to determine the extent of potential financial tightening, or how monetary policy should respond
  • No read, therefore, on the extent to which the FOMC sees the Fed funds tightening equivalent of the current banking sector episode ("You can think of it as being the equivalent of a rate hike, or perhaps more than that.").
  • The change in statement language reflects uncertainty of the impact; Powell appeared to imply that amendment buys them more optionality in whether to raise rates in future.
  • But he again pushed back forcefully against rate cuts ("not our baseline expectation" per the SEP).

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