The first statements from FED President Jerome Powell's highly anticipated speech at the New York Economic Club have arrived.
Powell was taken out of the hall where he was to give his speech because of climate protesters.
Here are the important statements made by Powell during his speech:
- Geopolitical tensions are 'highly elevated' and pose key risks.
- The FOMC is 'proceeding with caution' given the risks and increases so far.
- The policy-making committee is proceeding with caution.
- The policy stance is restrictive.
- Further evidence of above-trend growth or that the labor market is no longer loosening may require further tightening of monetary policy.
- Significant tightening in financial conditions combined with higher bond yields could have implications for policy; We continue to be careful.
- We are committed to maintaining a sufficiently restrictive policy stance.
- There may still be significant tightening.
- 'Additional evidence' of a strong economy may require an interest rate increase.
- FOMC 'proceeding with caution' given risks and hikes so far
- The task of balancing between too much tightening and too little tightening is complicated by numerous uncertainties.
- Inflation is still very high.
- A return to 2% inflation will likely require a period of below-trend growth and some further softening in labor market conditions.
- Low summer inflation data is very positive, while September data is slightly less encouraging.
- Restrictive monetary policy and eliminating pandemic-related distortions work together to reduce inflation.
- A strong economy may still warrant rate hikes.
Recent public statements by Fed officials and the minutes of the Fed's September policy meeting show that the central bank's decisions are now based on doing just enough to beat inflation while not doing so much that its actions trigger higher unemployment.
FED Vice President Philip Jefferson, who has an influential role in the institution, first announced this strategy earlier this month and said that the FED had to “balance the risk that the policy will not be tightened enough against the risk that it will be too restrictive.”
Treasury yields have risen recently on expectations that the Fed will keep interest rates higher for longer, which could slow the economy. The yield of the benchmark 10-year US Treasury bond reached its highest level since 2007 on Wednesday, while the yield of 30-year Treasury bonds exceeded the 5% limit.
*This is not investment advice.
