The US dollar hit fresh lows during Powell's conference but reversed when he said that “the ultimate level of rates will be higher” than previously anticipated. That means the +5% rate is back on the table. The statement “We have a ways to go on rates” probably most important statement from speech changed market sentiment, stocks shifted to downside and USD was higher in the day.
Below most important statements from Powell
- We're saying we will hike to a level that's sufficiently restrictive to tame inflation
- The ultimate top is 'very uncertain' but CPI and labor data suggests to me it will be higher than previously thought
- The time to slow the pace of hikes could be at the next meeting or the one after that. It will be discussed at the next meeting
- I don't think we've overtightened
- We had a discussion at this meeting about slowing rate hikes
- Long term inflation expectations have moved back down
- We don't have a lot of data on how quickly rate hikes hit an economy in a modern economy
- If we were to over-tighten, we could use our tools to support the economy
- It is very premature to think about pausing
- "We have a ways to go" on rates
Read all statement here.
Markets saw 50 basis points in December vs. 75. They could see the finish line for the tightening cycle after two Feed Meetings.
In conclusion inflation is not dead & employment remains strong that means we will not see a policy pivot point next two FED sessions. Negative for stocks positive for the Dollar
Read more about a pivot point.