CNBC – UPDATED WED, DEC 14 20223:19 PM EST
Changing the Fed’s inflation goal is off the table: Fed Chair Powell
Powell says a soft landing could still be possible
When asked if a soft Landing is no longer achievable, Fed Chair Jerome Powell said the economy could still skirt a recession.
“No, I wouldn’t say that. No, I don’t say that,” Powell said during a press conference. “To the extent we need to keep rates higher and keep them there for longer inflation … I think that that narrows the runway, but lower inflation readings, if they persist in time, could certainly make it more possible.”
“I just don’t think anyone knows whether we’re going to have a recession or not. And if we do, whether it’s going to be a deep one or not … it’s not knowable,” Powell s
aid.
— Yun Li
Fed announcement a reminder that inflation fight not over, says strategist
The Fed’s latest policy announcement serves as a reminder that, “even though we may be approaching the finish line, we aren’t there yet” with regards to the central bank’s fight against inflation, according to Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office.
“While it was good to see inflation come down these last two months, the Fed will need to see a few more signs over a longer time frame that inflation is under control before a full pivot. Fed hikes and volatility have been central themes of 2022, and investors should expect both–along with hits to corporate earnings–as we enter the new year,” he said.
— Fred Imbert
Federal Reserve uncertainty leaves policymakers `decidedly hawkish,′ LPL economist says
Federal Reserve policymakers are “uncertain about the future path for inflation and, as a result “have remained decidedly hawkish on rates,” LPL Financial economist Jeffrey Roach said in response to today’s FOMC rate hike and policy statement.
“However, the Fed has demonstrated a penchant for forecast revisions so we should not be surprised if the Fed revises the expected peak fed funds rate as inflation, including the sticky components, starts to moderate. Looking ahead, investors need to watch the inflation path for non-housing core services, which is clos[ely] tied to labor market conditions.”
— Scott Schnipper, Jeff Cox
Rate cuts unlikely until Fed is ‘confident’ about inflation
The Fed’s rate projections show no rate cuts in 2023, which stands in contrast to some market expectations prior to today’s data release.
Fed Chair Jerome Powell said the central bank would need to be confident in the path of inflation before looking at cutting its benchmark interest rate.
“Historical experience cautions strongly against prematurely loosening policy. I wouldn’t see us considering rate cuts until the committee is confident that inflation is moving down to 2% in a sustained way,” Powell said.
— Jesse Pound
Fed sees inflation risks ‘weighted to the upside’
While many investors believe inflation has peaked and will decline in 2023, the Fed is still taking a cautious stance, Jerome Powell said.
“Participants continue to see risks to inflation as weighted to the upside,” Powell said.
The central bank chief also stressed the importance of keeping inflation expectations low.
— Jesse Pound
What the bond market sees as hawkish from the Fed
Treasury yields moved higher after the Fed’s 2 p.m. rate hike and new economic and interest rate forecasts, as investors viewed the Fed as hawkishly positioned.
Yields move opposite price. The benchmark 10-year yield moved higher to 3.53%.
According to Jim Caron of Morgan Stanley Investment Management, the big issue that makes the Fed’s forecast hawkish is that central bank officials now sees their rate hikes stopping at a higher level of about 5.1%, versus its forecast of 4.6% at the September meeting.
Strategists also noted the Fed did not mention the better than expected consumer inflation report for November. CPI was up 7.1% on an annual basis, below expectations and well below the 7.7% in October.
Fed Chairman Jerome Powell, in his remarks, did give a nod to the inflation report. While he said there was a welcome reduction in the pace of inflation, he said the Fed needs substantially more evidence that inflation is being tamed.
“The fact that there was no text in the statement on the recent declines in inflation, the Fed is acknowledging inflation is much too elevated and they still have a hawkish stance,” said Mark Cabana of Bank of America.
–Patti Domm
Source: https://www.cnbc.com/2022/12/14/live-updates-fed-rate-hike-december.html
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