Powell Q&A: My assessment that rates were ‘meaningfully restrictive’ hasn’t changed

• I have had no contact with the President
• Policy is less-restrictive than when we began cutting
• We don’t need to see further weakening of labor market to achieve our inflation goal
• Assessment on policy hasn’t changed, policy is well-positioned
• We did some ‘language cleanup’ in the opening statement, removal of reference on ‘progress towards inflation goal’ was not meant to send a signal

Dovish comment there in the headline has hurt the dollar but it quickly bounced back because it initially wasn’t clear about whether he was talking about policy now or when he started cutting. He later clarified that he was talking about the restrictive nature of policy when they started cutting. However a second leg of recovery came when he said the removal of the line around progress towards the inflation goal wasn’t meant to send a signal.

• We’re on hold and waiting to see what ‘comes down’ in terms of government policy
• We want to see further progress on inflation, we think we see the pathway for that to happen
• We now do see OER coming down steadily
• We’ve also seen ‘non-market’ prices stubbornly high
• We seem to be set up for further progress on inflation, we are going to want to see it

This is another dovish signal, highlighting confidence from the Fed that there is some disinflation still in the pipeline.

• You can’t know where neutral is
• We are above pretty-much everyone’s estimate of neutral
• Our policy is affecting the economy and we see meaningful effects
• It’s appropriate that we ‘not be in a hurry’ to make further adjustments
• AI is a big development for the stock market but we are focused on macro economy

This article was written by Adam Button at www.forexlive.com.