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Powell Says Forecasts Remain Highly Uncertain

FED
  • Q: Is ongoing disinflation mostly the result of low hanging fruit like supply chains resolving, or is it a broader trend?
    • A: I think we knew that bringing inflation back down was going to take the unwinding of distortions to supply and demand from the pandemic. Monetary policy was going to help by cooling demand off. I do think both are at work now and shows the progress we are seeing.
  • Q: What would justify that last hiking move b/c the forecast is for lower core inflation? What justified not moving today?
    • A: Forecasts are highly uncertain, forecasters are a humble lot with a lot to be humble about.
    • What's happened is growth has come in stronger and that's required higher rates. The last 3 inflation readings were very good readings. It's only 3 readings but, really significant declines in core inflation. Headline of course has come way down, but some is now reversing on energy prices.
    • The FOMC has come very far very fast on rate increases. As we get closer to the stance we think is appropriate to bring inflation down to 2% over time, the risks of over vs under tightening become more 2-sided. The common sense thing is to move a little more slowly as you get close to it.
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