Comments from Fed Governor Jerome Powell, he will take questions later:
- Market adjustments larger than would be justified by any reasonable reassessment of the path of future Fed policy
- To extent market pricing in first Fed rate hike in 2014, that implies stronger economy than forecast by Fed
- In all likelihood, expects bond buying to continue for some time
- If economy grows as expected, bond buying to be scaled back later this year end around mid-2014
- Stresses importance of data over date
- If bond buying scaled back later this year it`s good news, acknowledges economic progress
- Communications bound to be imperfect, some volatility unavoidable and necessary part of the process
- Equity valuations within normal range
- US housing recovery could continue for many years
- Most important risk from QE is financial instability
This is a very similar tone to Dudley (and Bernanke for that matter). The stock market is cheering the soothing words and is up 1% to the highs of the day. It`s taken a week but the market has finally got a grasp on what conditionality means.
