Most all his comments are speculative (Like Transitory Inflation was at the time), except the one on our national debt.
Is anyone in DC listening?
Coming off a sizzling jobs report, which showed non-farm payrolls accelerating by 353,000 in January, investors tuned into the latest commentary from Jay Powell, who appeared on a 60 Minutes episode aired on Sunday. The Fed Chair was quick to highlight the robust U.S. economy and path towards a soft landing, as well as inflation that has come down sharply over the past year. Central bank watchers had much to digest in his latest remarks, with much of it echoing comments he made at his press conference on Wednesday, when the Fed kept its policy rate at 5.25%-5.50% and dented expectations that it would cut rates in March.
Is inflation dead?
"I wouldn't go quite so far as that. We're making good progress, [but] the job is not done. Restoring price stability means inflation is low and predictable and people don’t have to think about it in their daily lives."
Why not cut the rates now?
"Well, we have a strong economy and feel like we can approach the question of when to begin to reduce interest rates carefully. Growth is going on at a solid pace. The labor market is strong: 3.7% unemployment. And inflation is coming down."
What is it you're looking at?
"It's not that the data aren't good enough. We just want to see more good data along those lines. It doesn't need to be better than what we've seen, or even as good. It just needs to be good. And so, we do expect to see that. And that's why almost every single person on the Federal Open Market Committee believes that it will be appropriate for us to reduce interest rates this year."
What's the danger of moving too soon?
"Danger of moving too soon is that the job’s not quite done and that the really good readings we’ve had for the last six months somehow turn out not to be a true indicator of where inflation's heading."
What is the danger of moving too late?
"Policy would be too tight and that could easily weigh on economic activity and on the labor market."
Are you committed to getting all the way to 2% before you cut the rates?
"No, no. That’s not what we say at all, no. We’re committed to returning inflation to 2% over time. I've said that we wouldn’t wait to get to 2% to cut rates."
Is the national debt a danger to the economy in your review?
"In the long run, the U.S. is on an unsustainable fiscal path. The U.S. federal government is on an unsustainable fiscal path. And that just means that the debt is growing faster than the economy. So, it is unsustainable. I don't think that's at all controversial. And I think we know that we have to get back on a sustainable fiscal path."
Other highlights:
Powell doesn't expect that the slump in commercial real estate will lead to a banking crisis. Some smaller banks may collapse or have to merge with other banks, but he doesn't foresee the CRE market triggering a 2008-like financial crisis. Powell also flagged geopolitical risks as the greatest threat to the world economy, as recently identified in a Wall Street Breakfast poll, but said that engagement with the world and American leadership could benefit security and economic arrangements.
Source: Seeking Alpha
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Fortem Financial
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team@fortemfin.com
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