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Fed's Powell says monetary policy in this environment requires humility

January 26, 2022 2:30 PM EST

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(Updated - January 26, 2022 3:25 PM EST)

(Updated - January 26, 2022 2:34 PM EST)

Fed's Powell Begins Press Conference

  • Policy has been adapting to evolving environment
  • Omicron will weigh on economy this quarter, expected to drop off rapidly
  • unemployment has fallen sharply
  • Improvements in labor market have been widespread
  • labor-force participation edged up but still subdued
  • Bottlenecks, supply constraints limited production
  • Inflation well above target
  • committed to price stability goals
  • expect inflation to decline over year
  • economy no longer needs sustained high levels of support
  • Monetary policy in this environment requires humility
  • Reducing balance sheet will be in predictable manner, start after rate increases
  • Will be nimble on monetary policy
  • Are rate hikes at consecutive meeting on table? Powell: It's not possible to predict path of policy.
  • Guided by data
  • Both mandate sides call for move away from accommodation
  • very board support on Fed for moving toward rate rises
  • room to raise rates without hurting jobs
  • On balance sheet, Powell says just turning to questions
  • FOMC principles to guide balance-sheet decisions
  • Will provide more details on balance sheet at appropriate time
  • Sooner, faster on balance sheet than last time
  • Wants balance sheet to contract in predictable manner
  • Fed less certain about impacts of balance sheet vs rate hikes
  • Powell on volatility says focus is on the real economy, not financial markets
  • Have seen communication channel with markets working
  • Have eyes on risks
  • FOMC is of mind to raise rates at March meeting
  • Fed policy path is highly uncertain right now
  • Powell balance sheet will take time, will be orderly, predictable
  • Powell says "can't really help" on timing of balance sheet reductions
  • Fed to use at least one meeting after first hike to decide balance sheet
  • Risk is that high inflation will be prolonged
  • Inflation risks are still to the upside
  • Plenty of risks out there, risks on both sides
  • FOMC range on inflation has been moving right
  • Inflation situation slightly worse relative to December FOMC
  • If inflation deteriorates father, policy will address it
  • Supply-side is taking longer, eventually there will be relief on supply side
  • Outlook is quite uncertain, going to have to adapt
  • Haven't made decision on incremental rate hikes
  • Very tight labor market
  • Expects progress on supply chain in second half of year, not worked out
  • hasn't faced decisions on size of interest rate moves
  • We are aware this is a very different expansion
  • Want to keep price expectations well anchored at 2%
  • Labor market is going to be strong for some time
  • Fed monitoring incoming data as well as outlook
  • Too soon to say whether there was too much accommodation
  • We monitor slope of yield curve, but we don't control it
  • to move steadily away from accommodative policy
  • not possible to say exactly how it's going to go, will be nimble
  • economy is different
  • asset prices don't present risk to financial stability

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