Key Points
So you would expect me to welcome last weeks remarks by Fed Chair Jerome Powell that a rate reduction in March is not the Feds base case.".
Carefully crafted, it maintained considerable policy optionality by, first, noting that the risks to employment and inflation goals are moving into better balance," and then stating that it does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably towards 2%," its target..
He also stayed on script in responding to the first question on what policymakers need to see to gain confidence about sustainably meeting their inflation target, saying: We do have confidence, but we need greater confidence." Pressed further by reporters, and now in unscripted mode, Powell suddenly removed this optionality by pivoting to much greater precision..
A study published in March 2023 by the Centre for Economic Policy Research concluded that market volatility is higher during FOMC press conferences than at other times [and] this has been true since 2011 but is especially the case for press conferences given by current Fed Chair Jerome Powell.".
Last weeks pivot fuels the debate on whether Powell is speaking on behalf of the panel or expressing his personal views, an issue illustrated in the past by the publication of FOMC meeting minutes that countered some of the content of his press conferences, causing avoidable market confusion and volatility..
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