Thread by @arjungn80

Have faith in the Fed. In his testimony to the Congress/Senate Banking Committee, Powell urged lawmakers to have faith in the Fed's judgement. The Fed Chair reiterated his message that inflation would stay elevated for a few more months before moderating...(1/6)

...and that it would be too risky to tighten policy too early. He said:
“The challenge we’re confronting is how to react to this inflation, which is larger than we had expected or that anybody had expected. To the extent that it is temporary, then it would not...(2/6)

...be appropriate to react to that. But to the extent that it gets longer and longer, we’ll have to continue to revaluate the risks that would affect inflation expectations and would be of longer duration and that’s what we’re monitoring...”.
On the nature of...(3/6)

...inflation, he said:
“It is still the same story. It is still the same parts of the economy that are producing this inflation. It is a pretty narrow group of things that are producing these high readings, but we are anxious like everybody else to see that inflation...(4/6)

...pass through.”
Bond market yields continue to remain subdued with a drop seen over the course of Powell's testimony. The bond market narrative is that of uncertainty that seems to force bond investors to take money out of Treasury futures and probably...(5/6)

...also cut their shorts. It is interesting to note that some commentators see Powell's continued dovish policy reiteration to be reflective of a short-lived US recovery and peaking US growth.(6/6)