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Powell's "Careful" Speech Reiterates FOMC's Tightening Bias (1/2)


Chair Powell has concluded his keynote appearance at Jackson Hole - having given a fairly middle-of-the-road speech titled "Inflation: Progress and the Path Ahead" which leaned a little dovish in the context of mostly hawkish expectations (including some expecting him to opine on the longer-run rates being higher).

  • But really there was no departure from recent communications, with the most notable updates being acknowledgements of the most recent growth and inflation data. This is a cautiously optimistic speech on the inflation front while maintaining the FOMC's tightening bias.
  • Being "careful" was a key theme throughout: he says "risk-management considerations are critical" and characterizes the Fed's current position as "at upcoming meetings we are in a position to proceed carefully as we assess the incoming data and the evolving outlook and risks". In other words, not giving much away on future decisions.
The main quotes are as follows:
  • Maintaining the FOMC's recent guidance on rates: "Although inflation has moved down from its peak—a welcome development—it remains too high. We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective... At upcoming meetings, we will assess our progress based on the totality of the data and the evolving outlook and risks. Based on this assessment, we will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data."
  • Sounding perhaps a little hawkish on risks that econ activity / jobs market may be stronger than currently anticipated, but just that, a risk: "We are attentive to signs that the economy may not be cooling as expected...Additional evidence of persistently above-trend growth could put further progress on inflation at risk and could warrant further tightening of monetary policy...Evidence that the tightness in the labor market is no longer easing could also call for a monetary policy response."

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