Powell Q&A session: Key Takeaways

FED Chair Powell’s press conference is slowly heading towards its end.

Below we present key takeaways from Q&A session:

• By this point we'd been expecting to see signs of inflation at least flattening
• We got CPI and data on inflation expectations and shifted
• We thought strong action was needed at this meeting
• We decided we needed to do more front-loading
• The next meeting could well be a decision between 50 bps and 75 bps
• Policymakers would like to see rates at a modestly-restrictive level at the end of this year
• There is a risk that inflation may surprise 
• University of Michigan preliminary data "draws attention"
• We think policy is going to need to be restrictive, and we don't know how restrictive.
• Inflation can't go down until it flattens out, and that's what we're looking to see
• We're going to be careful about declaring victory. Inflation went down in the winter then came right back up
• Headline inflation is important for expectations
• An unemployment rate of 4.1% in 2024 would be a good result
• The FOMC wants the labor market to return to the pre-pandemic levels
• When demand drops, prices should start to fall

In summary, the current projections are based on the fact that inflation will slowly return to the target.This means that if prices continue to rise, there is a risk of a higher than 0.75% increase. However, Powell did not indicate any specific figure regarding the next meeting, saying that it will depend on the data. 

Market reaction is moderate. EURUSD pulled back a little, only to quickly resume upward move. Source: xStation5