Now that Powell has had his Tuesday powow after his Wednesday of last week séance investors will start scratching their heads again about what happens next, a decent time killer if you’re into masochism.
We would call it another Fed circle jerk excpet minors might be aboard.
Bloomberg reported this.
“Stocks erased gains after Jerome Powell said that if strong labor data persists, the peak rate in the current tightening cycle may be higher, while adding that it will take time to get to the 2% inflation target.
“Earlier Tuesday, Fed Bank of Minneapolis President Neel Kashkari said January’s strong labor-market report shows the US central bank would need to keep raising rates. “Right now I’m still at around 5.4%,” he told CNBC Tuesday, referring to his forecast for how high rates need to go to bridle inflation. The Fed raised its benchmark to a range of 4.5% to 4.75% last week.
“Now one key thing here is that the big driver of the surge in stocks since mid-October has been the fact that bets on the Fed’s terminal rate have stabilized around 5%, according to Deutsche Bank’s Jim Reid.
“But if we see expectations of the terminal rate take another leg higher, then clearly that would knock out a key pillar of support from the recent rally.”
Here’s another take. Source
“Neil Dutta of Renaissance Macro Research, weighs in:
“The Fed is wedded to a stale outlook. That is dovish because it gives the current momentum in the economy more room to run. He had the opportunity to lean against what happened last week and he took a pass. Stock market investors get it.”
Clearly, investors are encouraged that Powell hasn’t made any move to toughen his messaging to financial markets.
After that initial kneejerk higher, we'd note that Powell later reiterated that "we have a significant road ahead to get inflation down to 2%."
Additionally, Powell says the Fed may need to hike rates more than what is priced in the markets if employment reports come in unexpectedly strong and inflation climbs.
“The reality is if we continue to get strong labor market reports or higher inflation reports, it might be the case that we have to raise rates more than is now expected,” Powell said in remarks to the Economic Club of Washington.
The S&P rallied all the way up perfectly to pre-payrolls levels then puked on Powell's pushback...
His base case is that it won’t go away quickly and easily.
Fed whisperer Nick Timiraos paraphrasd Powell perfectly: "Despite many people believing (or hoping) the Fed's recent inflation projections were too high because inflation would come down faster, the Fed didn't see it that way and, given last week's job report, still doesn't."
Once again you’d be well advised to ignore the noise and look at what it is. All water filled balloons—speaking of balloons again, who pray tell brought that up— bulge somewhere when you push on them.
Get that correct and who the hell cares what the Fed minions drivel out.
Meanwhile, more noise in store with the Biden upcoming fantasy.