Fed chair Jerome Powell press conference🔎

Fed chair Powell starts the press conference after Federal Reserve decided to cut rates by 25 bps to 3.75%. Here is the highlight from his remarks.

Fed's Powell

• Available data suggest that the overall economic outlook has largely not changed.

• The outlook for employment and inflation has changed little since the last meeting.

• The labour market appears to be gradually cooling.

• The purchase of shorter-term Treasury securities is intended to support effective control of policy rates.

• Consumer spending is solid and business fixed investment is expanding.

• The housing sector remains weak.

• Data suggest the economy is expanding at a moderate pace.

• The effects of the recent shutdown should be offset by stronger growth next quarter as activity reopens.

• Available evidence suggests layoffs and hiring remain low.

• Labour demand has clearly softened.

• The September labour-market report showed the unemployment rate edged up and job gains slowed significantly.

• Labour-market sentiment has been deteriorating.

• Inflation remains somewhat elevated.

• Little new inflation data have arrived since the previous meeting.

• Inflation readings are higher as goods inflation has picked up.

• Disinflation in services is continuing.

• Most long-term inflation expectations remain consistent with the 2 percent goal.

• Risks to inflation are tilted to the upside.

• There is no risk-free path for monetary policy.

• The labour market is less dynamic and somewhat softer.

• Productivity has been structurally higher for several years now.

• Implication of Fed forecasts is higher productivity.

• Further normalization over the last three meetings should help stabilize the labor market, keep pressure down on inflation.

• With downside risks to employment having risen, the balance of risks shifted in the recent months.

• All agree the labour market has softened, and there are further risks.

• Everyone at the table agrees inflation is too high. Our two goals are a bit in tension.

Source: xStation5

The Fed decided to adjust its reserve-management policy to ease pressure in the money markets. Technical purchases may intensify over the coming months and then decline. Powell emphasized the role of repo operations (Standing Repo Operations) as a “critical tool” ensuring that the federal funds rate stays within the target range. The Fed has removed the cap on the volume of these operations.

Q&A

• The Fed is currently well positioned for future moves.

• The Fed will analyze incoming data and make decisions accordingly.

• By January, the Fed will have access to a substantial amount of data, allowing it to make a well-informed decision.

• The labor market has clearly weakened. There are some additional risks, but the situation is not bad.

• The impact of rate cuts will only become visible later.

• Considerable caution is needed when interpreting household-survey employment data.

• There is no discussion that the next move should be a rate hike. Some believe rates should not be cut further, while others see one or more additional cuts as appropriate.

• Although Powell suggested pausing in October, the labor market has cooled more significantly since then, which allowed for today’s move.

• The Fed believes that employment growth has been overstated by 60,000, and with an average gain of 40,000, this implies that the economy has effectively been losing about 20,000 jobs per month on average.

US100 moves higher following comments indicating that rate hikes are not being considered at this stage and that future policy decisions are more likely to involve holding or cutting rates. US100 is trading at daily highs, reversing earlier notable losses.