• Inflation is far above Feds objective
  • Price stability is the foundation of a strong economy
  • Responsibility central bank to maintain price stability
  • Inflation poses significant hardships
  • Fed is strongly committed to returning to 2% goal
  • Banking system is strong and resilient
  • Monetary policy and supervision tools are separate. Tools are complementary most of the time, but there is not an absolute separation monetary policy/supervisory tools.
  • Policy rate may not have to rise as far as otherwise due to tightening bank credit conditions
  • Possible there will be continued supply shocks but hard to predict
  • Positive supply shocks during globalization probably did help keep inflation low but they are not likely to be repeated
  • Central banks are still responsible for price stability regardless of supply shocks

US stocks are dipping a bit with the Dow industrial average now down around 30 points and the NASDAQ index down -11 points. The S&P is just moving into negative territory and is currently down -2.11 points.

Gold is moving higher and is currently up $16 at $1973.70

US yields are moving lower with the 2 year now down 2.4 basis points.

Powell's comment that policy rates may not have to rise as far as otherwise due to tightening bank credit conditions seems to be the catalyst. To me it seems a logical conclusion but not necessarily a certainty regarding policy action. Nevertheless the market is interpreting it as more dovish.

The USDJPY has moved sharply to the downside falling to a new intraday low of 137.49. The 100-hour moving average and 200-day moving average comes in near 137.18.

The EURUSD moved back above the 100-day moving average at 1.0807.

  • Relationship between labor market slack and inflation is not different from before the pandemic
  • Labor market slack does not figure into early inflation, but does think labor slack will be a factor in inflation going forward
  • Inflation and nonhousing services particularly susceptible to labor outcomes
  • Natural rate of employment probably rose sharply during the pandemic
  • Summary of economic projections from the Fed is very useful although it is not a forecast
  • Until recently clear further farming was warranted, now Fd has come a long way, with uncertainty about lagged effects of policy
  • guidance today is limited to assessing conditions that might warrant further farming
  • assessment will be an ongoing one
  • Markets are pricing in a different rate path than the Fed
  • That seems to reflect a different forecast of inflation coming down more quickly
  • So far data seem to support the committees of you that it will take time to lower inflation
  • Market prices also include compensation for risk
  • Surveys of market participants are closer to our own forecasts
  • We can afford to look at data now

The markets are now dealing with Powell and comments from the debt talks. The Debt talks seem to be taking more control with stocks moving lower. At 11:43:

  • Dow is down -150 points
  • S&P is down -14 points
  • Nasdaq is down -47.8 points

More from Powell:

  • Have not made any decisions about whether rates are sufficiently restrictive
  • Object is to reach a stance of policy that is sufficiently restrictive, have not made any decisions about how much more firming may be appropriate
  • Risks of doing too much vs too little is becoming more balanced

The event ends at 11:47 AM ET.

  • Dow is down -103 points
  • S&P is down -6.32 points
  • NASDAQ index is down -25.07 points
  • Gold is up $16.84
  • crude oil is down $0.56
  • 2 year yield is at 4.238% -3.1 basis points
  • 10 year yield is at 3.655% +0.7 basis points