- Comments from Powell in the Q&A
- By this point we’d been expecting to see signs of inflation at least flattening
- We got CPI and data on inflation expectations and shifted
- We thought strong action was needed at this meeting
- We decided we needed to do more front-loading
- The next meeting could well be a decision between 50 bps and 75 bps
- Repeatedly cites a ‘more normal range’ rather than ‘neutral’
- Policymakers would like to see rates at a modestly-restrictive level at the end of this year
- We’re not going to be model-driven in our approach
- “We think policy is going to need to be restrictive, and we don’t know how restrictive.”
- Cited UMich inflation expectations moving up
- “Inflation can’t go down until it flattens out, and that’s what we’re looking to see”
- We’ll see some progress at some point
- We’re going to be careful about declaring victory. Inflation went down in the winter then came right back up
- “You cannot have the kind of labor market we want without price stability.”
- We’re not trying to induce a recession
- We’ve been expecting progress on inflation but we’ve gotten the opposite
- The consequences of the Ukraine war are getting more and more clear
- Lots of countries around the world are looking at +10% inflation
- Headline inflation is important for expectations
- Overall spending is really strong. There’s no sign of a big slowdown from the consumer
- Drop in consumer confidence is probably about gas prices
- We’re not seeing a wage-price spiral
- I think we can get a softish landing; there’s a much bigger chance it will depend on things we don’t control
- We don’t know what will happen with supply shocks and how long they will last
- We’re seeing inflationary forces everywhere
The comments are about a ‘more normal’ range now rather than ‘neutral’. He caveated that with data dependence. The sense now (and rightfully) is that the Fed will go where the market (via the data) takes it.
I found the comment about ‘being careful to declare victory’ as telling. It means that even if we get 1-2 months of inflation flattening, the Fed won’t deviate from its course. That really validates the market pricing for 75/50/50 at the next three meetings even if inflation flattens out in August (or 50/50/50 if July flattens).