Key takeaways from Powell's presser

10:01 pm 27 July 2022

FOMC delivered a 75 basis point rate hike, putting the Federal Fed Funds rate in the 2.25-2.50% range. This was the second 75 basis point rate hike in a row and only a third one over in the past 30 years. However, such a decision was widely expected and market attention turned to the press conference of Fed Chair Powell as investors looked for more hints on the outlook for economy and monetary policy. Key takeaways from Powell's presser:

Opening statement

  • Inflation is much too high

  • Wage growth stays elevated

  • Labor market remains extremely tight

  • Growth in consumer spending is weakening

  • Overall demand within the economy remains solid

  • Fed continues to reduce balance sheet significantly

  • Another unusually large increase in rates will depend on data

  • It is likely appropriate to slow rate increase at some point

  • Fed will communicate its thinking as clearly as possible

Q&A session

  • 75 basis point hike was the right magnitude

  • Wouldn't hesitate to make larger hikes if appropriate

  • Fed funds in the range of neutral now

  • There is some evidence of slowdown in economic activity

  • FOMC members think that rates need to get to moderately restrictive levels

  • It's time to go to meeting-by-meeting basis and not provide a clear guidance as before

  • Creating recession is not our goal but a period of below-potential growth may be needed to let supply catch up

  • I do not think US economy is currently in a recession

  • First US GDP reports tend to be revised later on and should be taken with a grain of salt

  • Did not make decision on when to slow rate hikes

Money market currently prices in 59.5 basis points of tightening during FOMC meeting in September. Source: Bloomberg

The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.

Share:
Back

Join over 1 600 000 XTB Group Clients from around the world.