Fed's Powell says FOMC's inflation outlook doesn't support rate cuts

(Updated - May 3, 2023 3:08 PM EDT)

(Updated - May 3, 2023 2:32 PM EDT)

Fed's Powell Begins Press Conf.

• On banking sector, says conditions have improved
• banking sector is sound and resilient
• will continue to monitor banks
• Fed focused on mandates
• price stability is important
• will take data dependent approach from here
• labor market very tight
• some signs supply-demand in labor coming back into balance
• Inflation remains well above long run goal
• Inflation pressures run high
• Long run inflation expectations well anchored
• Attentive to risks of inflation
• Committed to returning inflation to 2%
• Economy likely to face headwinds from tighter credit
• to make decisions meeting by meeting based on data
• Prepared to do more if needed
• Begins Q&A
• Decision on pause was not made today
• Powell's forecast is for modest growth, not recession
• We will be driven by incoming data, meeting by meeting
• Economic consequences highly uncertain if no debt deal
• Banks building liquidity
• Fed has no agenda to consolidate banks
• Smaller, regional banks great part of banking system
• Don't want largest banks doing big acquisitions, recent actions were exception
• Not clear how persistent tighter credit from banking issues will be
• "Sufficiently restrictive" rates will be an ongoing assessment
• Not possible to say with confidence if have reached sufficiently restrictive level
• Have to balance risk of not getting inflation under control with doing too much
• want to see few months of data showing Fed moves right
• May not be far off, or possible at right restrictive level
• some softening in labor market, but still too strong
• Powell points to excess demand in labor market as reason to possibly avoid recession
• Case for avoiding recession is more likely, in his view
• Possible we'll have what he hopes is a mild recession
• On expanded profit margins, Powell sees supply and demand impact
• Expects return to full competition
• Focus going to be on what's happening with credit tightening
• Will assess how this fits with monetary policy
• Would not be appropriate to cut rates with Fed's forecast
• FOMC's inflation outlook doesn't support rate cuts
• FOMC discussed pausing but not for this meeting
• we're getting closer, maybe there for a pause
• there was a sense that we are nearing the end rather than the beginning on rates increases

You May Also Be Interested In

• Trump: Iran Strikes Will Be Limited
• Wall Street closes lower as oil prices jump, indexes notch monthly gains
• Wolfe Research sees August payrolls at 65k, above consensus