LIVE NOTES: Powell speaks at the FOMC Press Conference.
The Fed will be hiking interest rates by 50bps.
Balance sheet run-off will begin on June 1st.
We will be adding updates to this thread live as we watch the Press Conference!
#FOMC #FederalReserve #Fed #Powell
The Fed will be hiking interest rates by 50bps.
Balance sheet run-off will begin on June 1st.
We will be adding updates to this thread live as we watch the Press Conference!
#FOMC #FederalReserve #Fed #Powell
You can view Powell's discussion live through this link:
Balance Sheet Run-Off (QT): The Fed will not be reinvesting coupons and principal payments on the bonds it own.
As the bonds mature, these will run-off and effectively shrink their balance sheet.
As the bonds mature, these will run-off and effectively shrink their balance sheet.
Powell: The labor market is extremely tight and inflation is much too high.
The FOMC anticipates that ongoing increases in the target rate of the Federal Funds Rate will be appropriate.
The FOMC anticipates that ongoing increases in the target rate of the Federal Funds Rate will be appropriate.
Powell: Economic activity edged down in the first quarter.
Underlying momentum remains strong. Decline largely reflects swings in inventories and net exports. Likely carries little signal for future growth.
Household spending and business fixed investing continues to expand.
Underlying momentum remains strong. Decline largely reflects swings in inventories and net exports. Likely carries little signal for future growth.
Household spending and business fixed investing continues to expand.
Powell: Labor demand is very strong but labor supply remains subdued.
Employers are having difficulty filling job openings and wages are rising at the fastest pace in many years.
Employers are having difficulty filling job openings and wages are rising at the fastest pace in many years.
Surge in prices of crude oil and commodities as a result of Russia's invasion of Ukraine creates additional upward pressure on inflation.
COVID related lockdowns in China are likely to further exacerbate supply chain disruptions.
COVID related lockdowns in China are likely to further exacerbate supply chain disruptions.
There is a broad sense on the committee that additional 50 bps increases should be on the table at the next couple of meetings.
Depends on incoming data and evolving outlook on the economy.
Depends on incoming data and evolving outlook on the economy.
Main focus is using Fed's tools to bring inflation back down to its 2% goal.
Balance Sheet Runoff:
$30B per month in Treasuries for 3 months. After, it will be $60B per month.
$17.5B per month for Mortgage-backed securities for 3 months. After, it will be $35B per month.
$30B per month in Treasuries for 3 months. After, it will be $60B per month.
$17.5B per month for Mortgage-backed securities for 3 months. After, it will be $35B per month.
The American Economy is very strong and well-positioned to handle tighter monetary policy.
3.6% unemployment is about as low as its been in 50 years.
Committee expects people will be coming back into the labor force, which will bring unemployment up.
Also expects that job creation will slow (it's been very strong in recent months) due to tighter monetary policy.
Committee expects people will be coming back into the labor force, which will bring unemployment up.
Also expects that job creation will slow (it's been very strong in recent months) due to tighter monetary policy.
Wages are running at the highest level in many decades.
That's because of an imbalance between supply and demand of the labor market.
We need supply and demand to balance for wage increases to be more consistent with 2% inflation.
That's because of an imbalance between supply and demand of the labor market.
We need supply and demand to balance for wage increases to be more consistent with 2% inflation.
There are 1.9 job vacancies for every unemployed person.
We haven't been at this ratio in the modern era.
Need to moderate demand in order to get vacancies to come down.
That would give a chance to bring wages/inflation down without heading to a recession.
We haven't been at this ratio in the modern era.
Need to moderate demand in order to get vacancies to come down.
That would give a chance to bring wages/inflation down without heading to a recession.
Is 75 or 100bps points rate increases possible?
75bps is not something the committee is actively considering.
(Market seems to be responding well so far)
75bps is not something the committee is actively considering.
(Market seems to be responding well so far)
Neutral rate: Rate that neither pushes economic activity higher or slower.
It is an estimated but uncertain rate.
Committee estimates 2-3% (long-run estimate).
It is an estimated but uncertain rate.
Committee estimates 2-3% (long-run estimate).
If the path to price stability requires rates to be at a level that are higher than neutral, we will not hesitate to go to those levels.
Short term inflation expectations are quite elevated.
Longer-term inflation expectations have been reasonably stable.
Longer-term inflation expectations have been reasonably stable.
We cannot allow a wage-price spiral to happen and cannot allow inflation expectations to become unanchored.
On equity prices:
The Fed is looking at Financial Conditions Indexes. Equity prices is only one component of financial conditions. There are others like credit spreads and dollar strength.
Fed wants the index tighter, but not focused on any specific component.
The Fed is looking at Financial Conditions Indexes. Equity prices is only one component of financial conditions. There are others like credit spreads and dollar strength.
Fed wants the index tighter, but not focused on any specific component.
We expect growth to be solid this year.
Household spending and business investment is strong.
It's a good time to be a worker looking to change jobs or get a wage increase at your current job.
Strong economy - nothing about it suggests we are close to a recession.
Household spending and business investment is strong.
It's a good time to be a worker looking to change jobs or get a wage increase at your current job.
Strong economy - nothing about it suggests we are close to a recession.
Typically in a recession, you have unemployment.
Now you have surplus demand for labor.
There should be room to reduce that surplus demand without putting people out of work.
Now you have surplus demand for labor.
There should be room to reduce that surplus demand without putting people out of work.
Powell mentions that the Fed does not have a credibility problem.
Monetary policy works through expectations. Fed has only done 2 rate increases but the credit market has tightened already.
Markets have been responding to Fed's guidance.
Monetary policy works through expectations. Fed has only done 2 rate increases but the credit market has tightened already.
Markets have been responding to Fed's guidance.
Highlights:
75bps increases not actively discussed (market liked this a lot).
1.9 job vacancies per unemployed person. This ratio needs to come down.
Nothing about the economy suggests heading into a recession.
Credit market has tightened in response to the Fed's guidance.
75bps increases not actively discussed (market liked this a lot).
1.9 job vacancies per unemployed person. This ratio needs to come down.
Nothing about the economy suggests heading into a recession.
Credit market has tightened in response to the Fed's guidance.
If you enjoyed - a like and/or retweet of the linked tweet below is greatly appreciated!
Coming soon: Intro to the Federal Reserve.
We discuss how the Fed operates, what tools they have at their disposal and how their policies actually impact the economy!
Coming soon: Intro to the Federal Reserve.
We discuss how the Fed operates, what tools they have at their disposal and how their policies actually impact the economy!
https://twitter.com/FinTwitNotes/status/1521919136938565633?s=20&t=IBVQijzmrwrw7GMuoFkzCA
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