Powell expects growth at a “moderate pace” in 2023
Fed Chairman Jerome Powell is set for positive growth this year, albeit at a “moderate pace.”
“My base case is that there will be positive growth this year,” he said during a news conference on Wednesday.
Powell says it’s “certainly possible” that the fed funds rate will stay below 5%
In response to a question from CNBC’s Steve Liesman, Chairman Jerome Powell said it is “certainly possible” that the Fed will keep its benchmark interest rate below 5%. The latest Fed hike takes the fed funds rate to a range of 4.50% to 4.75%.
Powell also said he still believes the Fed can get inflation back down to 2% “without a really significant recession or a really significant increase in unemployment.”
The disinflation process has begun, says Powell
“Now we can say that I think the disinflation process has started for the first time. We can and really see it in commodity prices so far,” Fed Chairman Jerome Powell said at a news conference on Wednesday. .
Powell says it’s too ‘premature to declare victory’ over inflation
Inflation is declining in some areas of the market, but it is too early for the Federal Reserve to say the battle has been won, Fed Chairman Jerome Powell said.
“It would be premature,” he said. “It would be very premature to declare victory or to think that we really have this.”
The disinflation process, he said, is in its early stages, but “the job is not completely done.” Basic services excluding housing have not experienced disinflation yet, she added.
Powell also expects inflation to continue to rise in housing services, before falling.
Powell says more rate hikes are coming to reduce inflation
Fed Chairman Jerome Powell said the central bank could make a few more rate hikes to bring inflation back to its target.
“We’ve raised rates by four and a half percentage points, and we’re talking about a couple more rate increases to get to that level that we think is appropriately restrictive,” Powell said. “Why do we think that’s probably necessary? We think because inflation is still very high.”
The Fed is giving itself some leeway for future policy moves, says Evercore ISI
“We think the Committee is signaling that it hasn’t yet seen enough to consider a pause and is still geared toward two more hikes, but leaves open the possibility that more data accumulating that continues to support disinflation over the next couple of months could lead to the FOMC to pause after March, skip May and see how the second-quarter data evolves before deciding whether or not to implement a final hike in June,” Evercore ISI Vice President Krishna Guha said on Wednesday.
Powell says the Fed has not yet reached a ‘tight enough policy stance’
Despite the Federal Reserve’s aggressive rate hike campaign, the central bank has more work to do, according to Fed Chairman Jerome Powell.
“I would say our focus is not on short-term moves but on sustained changes in broader financial conditions,” he said during a news conference on Wednesday. “And it is our judgment that we are not yet in a sufficiently restrictive policy stance, so we say we expect continued increases.”
Economy still in ‘early stage’ of inflation relief, says Powell
Powell acknowledged that there have been positive signs in recent jobs reports, even as employment data has 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 an “early stage” of easing inflation.
He said a drop in property prices and data showing a recent weakening in the rental housing market is a “good story.”
However, he said the Fed “does not yet see disinflation” in the utilities portion of inflation, excluding housing.
Inflation and the Fed’s battle against it aren’t over, says economist
Market participants should not expect rate cuts later this year from the Federal Reserve, suggested José Torres, a senior economist at Interactive Brokers.
“While goods are experiencing sharp disinflation, commodities and services are actually accelerating, despite headlines screaming colder inflation. In fact, the Cleveland Fed’s forecast for CPI headline January puts it at 7.6% annualized. Plus, today’s job posting data suggests incredible resilience.” job market,” she said. “Inflation isn’t over, and neither is the Fed’s battle against it.”
Powell begins with aggressive stance against inflation
Jerome Powell has begun his press conference reaffirming the position of the central bank in the fight against inflation.
Powell was repeating comments from previous appearances. He said the Fed remained “firmly committed” to reducing inflation, repeated language in the statement about ongoing rate hikes and emphasized the problems inflation can cause consumers and the job market.
“Without price stability, the economy doesn’t work for anyone,” Powell said.
Expect aggressive Powell after minor statement changes, Boockvar says
Peter Boockvar, chief investment officer at Bleakley Advisory Group, said the minor changes to the Fed’s statement shouldn’t surprise the market. However, he said that Chairman Jerome Powell will likely take an aggressive stance against inflation at his news conference.
In a nutshell, Powell has been intent on making the FOMC statements as calm as possible and today was really no different with the slight changes stated while mentioning inflation moderating but still ‘elevated’ rate. I think Powell in the press of him will remain with his boot on inflation’s neck, but we know he’s not really pushing anymore, except maybe one more time,” Boockvar said in a note.
The Fed is waiting too long to pause rate hikes, says JPMorgan’s David Kelly
David Kelly of JPMorgan Asset Management has long said that the Federal Reserve traditionally starts reacting to economic conditions too late, goes too high on hikes, and stays too long.
“They say they recognize the long lags in which monetary policy hits the economy, but with inflation coming down and consumer spending falling, with industrial production falling, they’re still raising rates. That’s obviously waiting too long,” Kelly said. , the firm’s chief global strategist.
The Fed’s post-meeting statement said officials will determine the extent of future hikes based on factors such as the effects so far of the rate hikes, the lags over which the policy has an impact, and the evolution of financial conditions and the economy.
The Fed might prefer a recession, says portfolio manager
Brandywine Global portfolio manager Bill Zox isn’t convinced the Federal Reserve is even attempting a soft landing.
A soft landing would imply that the central bank would slow down the economy and control inflation while avoiding a recession.
“While they would never say it, they might prefer the restorative aspects of a recession and a proper bear market,” he said shortly after the Fed raised rates again.
Something for the pigeons: Fed says inflation has ‘slowed down a bit’
The Federal Reserve promised to continue fighting high inflation on Wednesday, raising rates by 25 basis points. However, some market participants may be hinting at a part of the latest Fed statement that said inflation “has come down a bit, but it’s still elevated.”
That comment seemed to help the major stock averages pull back from their session lows.
—Fred Imbert, Jeff Cox
Fed statement still points to “continued increases”
The latest statement from the Federal Open Market Committee left some key terms unchanged, which may have contributed to the immediate negative reaction in stocks.
The Committee statement still says that “continued increases in the target range will be appropriate.”
Elsewhere, the new statement added that inflation “has come down a bit.”
See the rest of the changes here.
Stocks fall to session lows after Fed decision
The major US stock averages briefly fell to their session lows on Wednesday following the release of the Fed’s latest monetary policy announcement. The Dow fell more than 300 points, or 1%. The S&P 500 and Nasdaq were down 0.5% and 0.3%, respectively.
Fed raises 25 basis points, but expects “continued” increases
The Federal Reserve raised benchmark overnight loan rates by 25 basis points, or 0.25 percentage points, matching investor expectations. The increase brings the Fed’s target range to 4.5-4.75%, the highest level since 2007.
In its statement, however, the Fed stood by the language noting that the FOMC still sees a need for “continued increases in the target range.” Market participants expected the phrase to be watered down a bit, but the unanimously approved statement kept it intact.
Where are the markets ahead of the Fed?
Here’s a snapshot of where the financial markets are ahead of the Fed’s announcement at 2 p.m. ET:
(Numbers as of 1:45 p.m. ET)
Potential winners of a Fed pause
The Fed has been raising rates since March of last year, putting pressure on the broader market as it tries to stave off rising inflation. However, some of the stocks hit hardest by rate hikes could be big winners if the Fed hints at a pause.
CNBC Pro looked at the stocks that were hit the hardest in the five trading days after each of the Fed’s rate hikes last year, beginning with the first quarter-point hike last March. Of those, we take the worst average performance within that five-day period for each of the seven 2022 rate increases.
Among those actions are world paramount, DisneyY Discovery by Warner Bros..
—Michelle Fox, Fred Imbert
What to expect from the Federal Reserve
Markets have priced in near 100% certainty that the Federal Open Market Committee will announce an interest rate hike of 0.25 percentage point to conclude its first policy meeting of 2023.
What the markets are not sure of is where the Fed goes from here. Traders are betting that the central bank will raise a quarter of a point once more in March, then stop, pause for several months, and then start cutting towards the end of the year.
Knowing that the fight against inflation is far from over, Chairman Jerome Powell may reject the idea of a looser Fed so soon in the future.