RBC FOMC Review: Powell’s Rationale For Current Policy Is Weak

RBC believes - following the outcome of the April FOMC - that Chair Powell's problem is that "he is going to have to start 'thinking about talking about' what happens next" for policy, amid strong growth and what RBC regards as building inflation pressures (not just base effects).

• RBC sees Powell's stated rationale for current policy as "weak", with job openings up sharply, and some inflation expectations "well through where they were prior to the pandemic".
• They see the following Powell press conference comment put to the test in coming months: "So it seems unlikely frankly that we would see inflation moving up in a persistent way that would move inflation expectations up while there's still significant slack in the labor market. I won't say it's impossible, but it seems unlikely."