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Powell Says Anchored Expectations Not Ground For Complacency

FED
  • Powell not dovish on inflation:
    • Inflation remains "well above" our longer-run 2% goal.
    • "The inflation data received over the past three months show a welcome reduction in the monthly pace of increases. While recent developments are encouraging, we will need substantially more evidence to be confident that inflation is on a sustained downward path."
    • Although inflation expectations remain anchored, "that is not grounds for complacency. [Inflation] remains too high and the longer it continues, the greater the chance expectations that higher inflation will become entrenched... We are highly attentive to the risks inflation imposes to both side of the mandate."
  • Powell notes that tightening policy is having an impact but works with a lag too:
    • "It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation..", and explains the stepdown to 25bp hikes with "Shifting to a slower pace will better allow the Committee to assess the economy's progress toward our goals, as we determine the extent of future increases that we require to obtain a sufficiently restrictive stance."
    • We've heard that language from FOMC members before, as well as "The historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done.
  • Q&A begins.
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