Powell Subtly Pushes Back Against 2022 Hike Expectations

One of the biggest takeaways from today is Powell's argument that the Fed won't know until at least mid-2022 if the economy has evolved to the point where rate hikes are appropriate - thus subtly pushing back on the idea that the Fed will hike in H1, i.e. before the taper is done. He mentioned a couple of key points in the timeline:

• "As the pandemic subsides supply bottlenecks will abate. As that happens, inflation will decline from elevated levels. The timing of that is uncertain. We should see inflation moving down by the second or third quarter."
• And "We have high inflation, and we have to balance that with what is going on in the employment market. So it's a complicated situation. We hope to achieve significantly greater clarity about where this economy is going and what the characteristics of the post pandemic economy are over the first half of next year."-
• Multiple comments pushed back on the idea that the Fed was thinking about hiking: "We have not focused on whether we meet the liftoff test, because we don't meet it now, because we are not at maximum employment." " I don't think we are behind the curve. "
• Also noted that while " the risk appears to be skewed toward higher inflation", "It's appropriate to be patient. It's appropriate for us to see what the labor market and what the economy look like when they heal further ... we think it will involve in a way that will mean low inflation. "