Fed Chair Powell Is Not In A Hurry

FOMC meeting

If the Fed Chair is not in a rush to tinker with monetary policy, you probably shouldn’t be in a rush to tinker with your portfolio. There has been a lot of panic in recent weeks due to the market correction on Wall Street, but it’s important to stay rooted to what the numbers say for themselves as opposed to the latest fearful or worrisome projections. There’s no better way to see that than what Powell said the day before the current Fed blackout period, with the message likely to be reiterated this afternoon as the central bank captain takes the stage at 2:30 PM ET.

Quote: “Despite elevated levels of uncertainty, the U.S. economy continues to be in a good place. The labor market is solid, and inflation has moved closer to our 2% longer-run goal,” Powell told the U.S. Monetary Policy Forum on Mar. 7. “Sentiment readings have not been a good predictor of consumption growth in recent years. We continue to carefully monitor a variety of indicators of household and business spending.”

“Looking ahead, the new Administration is in the process of implementing significant policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation. It is the net effect of these policy changes that will matter for the economy and for the path of monetary policy. While there have been recent developments in some of these areas, especially trade policy, uncertainty around the changes and their likely effects remains high. As we parse the incoming information, we are focused on separating the signal from the noise as the outlook evolves. We do not need to be in a hurry, and are well-positioned to wait for greater clarity.”

Thought bubble: Despite some turbulent stock trading, all of the indicators that the Federal Reserve is watching appear to be holding up just fine. The unemployment rate remains low, wages are growing faster than inflation, the jobs-to-workers gap has narrowed, and the quits rate has moved below pre-pandemic levels. At the end of the day, those are the factors that will determine the trajectory of monetary policy, as well as the central bank’s updated dot plot and economic projections.

Source link