Powell Stands By The Dot Plot, Notes Two-Way Terminal Rate Risk (2/2)

Powell also stood by the December Dot Plot, both implying that a "couple more" 25bp hikes and no cuts to year-end were the central view at this point.

• He didn't push back against easing financial conditions when asked on a couple of occasions, but repeated that the market and the Fed's disagreement on the path ahead hinged on different views of inflation: "We have a different view, a different forecast really. Given that, I don't see the rates coming down, as I mentioned, if we do see inflation coming down much more quickly, that will play into our policy-setting"
• On that note, his comment toward the end didn't sound like a dogmatic hawkish Volckeresque Fed Chair, conceding that the data could change the FOMC's plans: "our forecast is that [bringing inflation down to target] will take some time and patience, and we will need to keep rates higher for longer, but we will see."
• Looking ahead to the coming meetings, it will be a story of data dependence.
• It seemed clear despite his nascent inflation optimism that he saw at least some two-way risk to the 5.1% terminal rate in the December Dot Plot: "We will be looking at the incoming data between the March meeting and May meeting. I don't feel a lot of certainty about where that will be. It could be higher than where we are writing down right now. If we come to the need to move rates up beyond what we said in December, we would certainly do that."
• Overall the path seems clearly paved to 25bp hikes in March and May, but there may be even more heightened sensitivity than usual to incoming data over the next few months.