Important Statements on Monetary Policy from Fed Chairman Powell!

The Current State of Monetary Policy

Powell said, “The stance of monetary policy is quite restrictive, and the full effects of the tightening have not yet been felt,” indicating that the policies of the FOMC are being meticulously implemented. He also noted that the inflation target is still far off, but financial conditions have tightened, which could influence the direction of policy.

Economic Growth and Inflation Expectations

While Powell highlighted that the US economy exceeded growth expectations, he indicated that the Federal Reserve could consider raising interest rates to manage and control inflation. He added they were not sure whether the Fed had reached the policy tightness and stance necessary to achieve its inflation target.

Policies and Risk Assessments for the Future

In the press conference, Powell said, “We have not included a possible recession scenario in our economic forecasts,” and also stated that economic activities do not show signs of a recession at present, and geopolitical turmoil is being closely monitored.
Commenting on the labor market and rates of economic growth, Powell said that they expect to see slower growth and a possible loosening in the labor market.

Positive Developments and the Success of the Fed

Powell emphasized that they are seeing the effects of the implemented monetary policies and are making progress on inflation. As Fed officials, they do not anticipate a recession, noting that inflation expectations have reached a good point over time.

Negative Scenarios and Risks

Powell expressed doubts about whether the current policies have provided enough tightening, stated that the idea of an interest rate cut is not on the table at this moment, and mentioned the government shutdown as a potential source of risk.

Overview and Next Steps

The Fed Chairman noted that expectations related to long-term bond pricing and policy interest rates have not yet led to an increase, but no decision has been made about the steps to be taken in upcoming meetings. He also mentioned that they have to shape monetary policies under great uncertainties.
Summary

According to Fed Chairman Jerome Powell, the current position of monetary policy is quite restrictive, and the full effects of the tightening have not yet been felt.

It is emphasized that there is still a long way to go to pull inflation down to the Fed’s target of 2% and that progress towards this goal is being carefully managed.

Powell points out that the US economy has grown beyond expectations and that any data on economic growth above potential could bring an interest rate hike into the agenda to cool the economy.

It is stated that financial conditions have tightened, especially due to high long-term bond yields, which could be decisive in the direction of the Fed’s monetary policy.

Powell mentions that Fed officials have not included “a possible recession” scenario in their economic forecasts, and current economic activity does not show near-term recession signs.