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Powell Sees R-Star "Uncertainty", Sounds A Bit Dovish On Policy Lags (2/2)

  • Dovish on lags: "The wide range of estimates of (tightening) lags suggests that there may be significant further drag in the pipeline." (Sounds if anything a little dovish given that he was fairly equivocal on the topic at the July press conference, and that his conclusion in this sentence could easily have been replaced with "suggests that the most significant drags may be in the past".
  • Powell's first comments on the July CPI: "The lower monthly readings for core inflation in June and July were welcome, but two months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal."
  • On the current monetary stance, and r-star: "Real interest rates are now positive and well above mainstream estimates of the neutral policy rate. We see the current stance of policy as restrictive, putting downward pressure on economic activity, hiring, and inflation. But we cannot identify with certainty the neutral rate of interest, and thus there is always uncertainty about the precise level of monetary policy restraint."
  • On the inflation target (about which there has speculation could be raised): "Two percent is and will remain our inflation target. "

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