Fed Powell is giving his opening remarks and says:
- Purchase of shorter-term securities to support effective control of policy rates.
- Consumer spending solid, business fixed investment expanding.
- Housing sector remains week
- effects of the shutdown should be offset by higher growth next quarter from reopening. Layoffs, hiring remain low
- September labor market releases showed unemployment rate edged up, job gains slowed significantly.
- Labor demand has cleared softened.
- Less dynamic, somewhat softer labor market.
- Downside risks and labor market.
- Inflation remained somewhat elevated.
- Little data on inflation have been released since October meeting.
- Readings on inflation are higher as goods inflation has picked up.
- Disinflation continued for services.
- Near-term risk to inflation tilted upside, to employment to the downside.
- There is no risk-free policy path.
- With downside risk to employment having risen, balance of risks shifted.
- Well positioned to determine adjustment to policy rate
- further normalization of last 3 meetings should help stabilize labor market, key pressure down on inflation.
- Policymaker projections are subject to uncertainty, not a plan or decision.
- No preset by meeting basis.
- Rates are now in a plausible range of neutral.
- Committee judges reserve balances have declined to ample levels
Q&A
- The “extent and timing phrase” points out we’ll carefully evaluate incoming data.
- Well positioned to wait to see how economy evolves.
- Consumer spending has been resilient, spending on AI data centers has held up business
- fiscal policy will be supportive.
- Baseline is for solid growth next year.
- AI spending continues
Market reaction at 2:42 PM ET
US stocks have seen some rotation to the downside with the NASDAQ down -0.31%. The S&P is still up 0.15% and the Dow is up 0.61%. The market is reacting somewhat negatively to the comment that rates are now in a plausible neutral range.
Continuing Q&A
- We will get a great deal of data before January meeting.
- We can wait and see how economy evolves.
- Implications of projections is for higher productivity.
- If productivity is 2% per year, you could sustain higher GDP growth without job growth.
- Our 2 goals are a bit in tension
- Everyone at the table agrees inflation is too high.
- All agree labor market has softened and there is further risks.
- The difference among the 2 groups is how do they rate the risks to inflation and to employment.
- Discussions we’ve had our thoughtful, respective of people with strong views.
- We come together and reach a place where we can make a decision.
- Fairly broad support for today’s decision
- Effects of rate cuts so far only beginning to be coming in.
- We will have to be careful to assess household survey data. The data may be distorted because data was not collected in October and half of November.
- We’ll need to look at data was skeptical high
- For CPI or household survey, will understand it may be distorted by technical factors.
- I could make the case for either side.
- One tool (the Fed Funds rate) can’t do two things at once referring to lowering inflation and keeping employment from rising.
- Does not think a rate cut is anyone’s base case.
- Some people feel we should stop here and wait
- Some people feel we should cut once or more.
- People see either holding here or cutting.
This article was written by Greg Michalowski at investinglive.com.
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