Powell's conference - key takeaways

8:54 PM January 26, 2022

Key takeaways from Fed Chair Jerome Powell post-meeting press conference:

  • Fed will adapt quickly to changes in the financial conditions

  • High inflation and strong labour market allows for policy adjustments

  • Omicron has less severe impact on economic activity than expects, signalling a quicker recovery

  • Labour markets is in good condition, participation rates increased recently but remains depressed

  • Fed looks at risk of wage-price spiral inflation acceleration

  • Inflation should drop over the coming year

  • Fed did not make decision on balance sheet reduction timeline or size

  • Balance sheet reduction will come no sooner than after the first rate hike

  • Interest rates will be key tools in use by Fed

  • A lot of room to increase rates without hurting jobs market

  • Powell does not rule out hike rates at every meeting if situation requires it

In short, Powell's press conference did not bring any surprises. It was known that interest rate hikes will come soon and the balance sheet will be reduced later. One thing of note is that Powell did not rule out quicker rate lift-off with possibility of rate hikes on every meeting after March. Stock markets reacted negatively with US indices trimming part of gains. USD dollar gained following during the presser, pushing EURUSD down to 1.1250.

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USD caught a bid during Powell's presser after Fed Chair said that he does not rule out hiking rates during each meeting. EURUSD plunged from 1.1300 to 1.1250 and moved below the lower limit of the triangle pattern. Source: xStation5

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