- We don't think we need further cooling in the labor market to get inflation down to 2%
- Labor market is quite gradually cooling
- We see the inflation story as broadly on track
- Job creation is below the level that would hold jobless rate consistent
- Downside risks to labor market have diminished but still cooling
- The actual cuts next year will be in regards to data, not anything we wrote down today
- As for additional cuts, we're going to be looking for further progress on inflation or weakness in jobs
- As long as jobs and inflation are solid, we can be 'cautious' about cutting
I think that speaks strongly for itself. We will see what jobless claims are tomorrow and we will go from there. The baseline is strongly pointing to leaving rates unchanged in January but we get three jobs reports before the March meeting and it's priced at roughly 50/50.
- We had a year-end inflation forecast and 'it's kind of fallen apart'
- Says that was probably biggest factor in dots
The market doesn't like to hear the Fed chair say 'it's kind of fallen apart' in any context.
- It's premature to make any conclusions about tariffs, don't know what countries, what size, how long
- We are at the stage of thinking through questions, not getting definitive answers
- A drop to 2.5% core inflation next year would be 'significant progress'
- 'extent and timing' language shows where we are at a point where we can slow the pace of cuts
- We have to continue to have restrictive policy to get inflation to 2%
- Also notes they need to keep a close eye on employment and keep it where it is
- Housing services inflation has come down steadily
- We do think the labor market is still cooling, but not in a way that really raises concerns
- We need to see progress on inflation and that's how we're looking at it
- The higher rate is lower and that's a signal of further softening
- The downside to the labor market clearly has diminished
- Inflation has been 'a little bit' more stubborn
- Geopolitical turmoil remains a risk
- It's appropriate to proceed cautiously
Powell was asked about hikes and said:
"You don't rule things completely in or out in this world, but that doesn't appear to be a likely outcome,"
The market has had a strong hawkish reaction with the market pricing in 32 bps in easing next year from 48 bps prior.
Federal Reserve