Powell says the Fed has not yet reached a “sufficiently restrictive policy stance.”
Despite the Federal Reserve’s aggressive rate hike campaign, the central bank has plenty of work to do, according to Fed Chairman Jerome Powell.
“I would say our focus is not on short-term measures, but on long-term changes in the broader financial environment,” he said at a news conference on Wednesday. “And it’s our judgment that we’re not yet at a sufficiently restrictive policy stance, so we’re saying we expect continued hikes.”
– Samantha Subin
Powell says the economy is still in the early stages of deflation
Powell acknowledged that there were positive signs in the latest employment report, even as labor force data remained strong, but said it was too early to celebrate.
“It’s good that the disinflation we’ve seen so far hasn’t come at the expense of the labor market,” Powell said, but added that the economy is still in the “early stages” of deflation.
He said falling commodity prices and data showing a recent softening of the rental housing market was a “good story”.
However, he said the Fed “doesn’t see inflation coming down yet” for core services that are part of inflation, excluding housing.
— Jesse Pound
Inflation and the Fed’s fight against it are not over, economist says
Interactive Brokers Senior Economist Jose Torres suggested that market participants should not expect any rate cuts from the Federal Reserve this year.
“While goods are experiencing a sharp decline in inflation, the prices of goods and services are actually rising despite headlines screaming for cooler inflation. In fact, the Cleveland Fed’s January headline CPI shows it at 7.6% annually. Additionally, today’s jobs data shows incredibly resilient in the labor market,” he said. “Inflation is not over, and neither is the Fed’s fight against it.”
— Michelle Fox
Powell starts with an aggressive stance on inflation
Jerome Powell started his press conference by reaffirming the position of the central bank in the fight against inflation.
Powell repeated comments from previous performances. He said the Fed remained “firmly committed” to reducing inflation, reiterated the announcement of ongoing rate hikes and highlighted the problems inflation could pose to consumers and the labor market.
“Without price stability, the economy doesn’t work for anyone,” Powell said.
— Jesse Pound
Expect a hawkish Powell after a few changes to the announcement, Bookkvar says
Peter Bookquar, chief investment officer at Bleakley Advisory Group, said the slight change in the Fed’s announcement should not come as a surprise to the market. However, he said Chairman Jerome Powell is likely to take an aggressive stance on inflation in his press conference.
Basically, Powell has been trying to keep the FOMC statements as simple as possible, and today was really no different with little change in the mention of moderate but still “elevated” inflation. I believe Powell will remain with a boot on inflation’s neck in his push, but we know he’s not pushing for maybe one more time,” Bukkvar said.
— Jesse Pound
The Fed is waiting too long to stop raising rates, says JPMorgan’s David Kelly
David Kelly of JPMorgan Asset Management has long said that the Federal Reserve has traditionally been too late to respond to economic conditions, has gone too high with hikes and stayed in too long.
“They say they recognize the long lags that monetary policy has on the economy, but with inflation coming down and consumer spending falling, industrial production falling, they’re still raising rates. It’s obviously waiting too long,” Kelly said. the company’s chief global strategist.
The Fed said in a statement after the meeting that officials will determine the size of future hikes based on factors such as the impact of rate hikes to date, the lag in policy effects, and developments in financial conditions and the economy.
— Michelle Fox
Fed might favor recession, portfolio manager says
Brandywine Global portfolio manager Bill Zox isn’t convinced the Federal Reserve is even pushing for a soft landing.
A soft landing would mean the central bank would slow the economy and rein in inflation while preventing a recession.
“Although they would never say so, they might favor the restorative aspects of the recession and a proper bear market,” he said shortly after the Fed raised rates again.
— Michelle Fox
Something for the Doves: Fed Says Inflation ‘Eased Somewhat’
The Federal Reserve on Wednesday vowed to continue to fight high inflation by raising rates by 25 basis points. However, some market participants may take issue with one part of the Fed’s latest statement, which said inflation “has eased somewhat but remains elevated.”
The note appears to have helped major stocks average out from session lows.
— Fred Imbert, Jeff Cox
Fed statement still points to ‘steady gains’
The Federal Open Market Committee’s latest statement left some key wording unchanged, which may have contributed to the immediate negative reaction to stocks.
The committee’s statement continued to say that “a permanent increase in the target range will be appropriate”.
Elsewhere, the new statement added that inflation had “moderated somewhat”.
See the rest of the changes here.
— Jesse Pound
Stocks fall to session lows after Fed decision
Major U.S. stock market averages briefly fell to session lows on Wednesday after the Fed’s latest monetary policy announcement. The Dow was last down more than 300 points, or 1%. The S&P 500 and Nasdaq traded up 0.5% and 0.3%, respectively.
The Federal Reserve will hike by 25 basis points, but expects “steady” growth
The Federal Reserve raised benchmark overnight lending rates by 25 basis points, or 0.25 percentage points, meeting investor expectations. The hike raises the Fed’s target range to 4.5-4.75%, the highest level since 2007.
However, in its statement, the Fed went on to say that the FOMC still believes there is a need to “permanently increase the target range.” Market participants had hoped for a softening of the phrase, but the unanimously approved statement kept it intact.
– Jeff Cox
Where markets stand ahead of the Fed
Below is a snapshot of where the financial markets are in the run-up to the Fed announcement at 2 p.m. ET:
(Numbers as of 1:45 p.m. ET)
— Fred Imbert
Potential beneficiaries of the Fed pause
The Fed has been raising rates since last March, putting pressure on the broader market as it tries to fend off rising inflation. However, some of the stocks that have been hit hardest by rate hikes could be big winners if the Fed hints at a pause.
CNBC Pro looked back at the stocks that were hit the hardest in the five trading days after each of the Fed’s rate hikes last year, starting with the first-quarter point increase last March. From those, we took the worst average performance over that five-day period for each of 2022’s seven rate hikes.
Among these stocks are Paramount Global, Disneyand Warner Bros. Discovery.
— Michelle Fox, Fred Imbert
What to expect from the Fed
Markets have pegged near 100% certainty that the Federal Open Market Committee will announce a 0.25 percentage point rate hike to conclude its first policy meeting in 2023.
Markets are uncertain about where the Fed goes from here. Traders are betting that the central bank will raise rates one more quarter point in March, then pause, pause for several months, and then begin tapering at the end of the year.
Recognizing that the fight against inflation is far from over, Chairman Jerome Powell may not so soon abandon the idea of a looser Fed.
– Jeff Cox
