Powell's testimony - key takeaways from Q&A session

Testimony of FED chairman Jerome Powell in front of Congress has just started. Initially indices moved lower and dollar strengthened after remarks regarding further rate hikes. Below we will present some key takeaways from  the Q&A session:

• The current tightening circle is unlike any other. There is no visible supply collapse in response to interest rate hikes

• Commodities prices remain high. Real estate prices have increased dramatically in the last dozen or so monthsWe will maintain strong capital requirements.

• The Fed must do a better job of aligning demand and supply.

•  Mismatch between supply and demand, this is still evident in the goods sector as well as the labor market.

• Core inflation has not fallen as quickly as we had hoped and still has a long way to go.

• We will meet our 2% inflation target.

• We have the tools to reduce inflation over time.

• It's not our job to point the finger at who is responsible for inflation (question regarding Biden Administration)

• The debt ceiling must be raised by Congress.

• The Fed will do everything possible to restore price stability while maintaining maximum employment.

•  If we fail to do, the effects could be extraordinarily adverse.

• We are a long way from meeting the price stability mandate.

• We are not attempting to increase the unemployment rate.

• We are attempting to realign supply and demand via a variety of channels, including job openings.

• There may come a time when our mandates clash.

• Goods inflation has been declining for some time.

• Housing service inflation is expected to fall in the next 6-12 months.

• However, the challenge now is in core services excluding housing.

• We have yet to see the full impact of rate increases.

• We carefully monitor the exposure of small and medium-sized banks to CRE.

• A fundamental principle I support for Crypto and other areas of concern is the same activity, same regulation.

• The Fed is very committed to tailoring regulations for banks.

• We do not believe that a significant increase in unemployment is required to bring inflation under control.

• 4.5% unemployment is still lower than most times in history.

• The Fed saw rates at 5.0-5.5% in December. These expectations may move higher in March.

Despite the lack of any groundbreaking comemtns, EURUSD has been diving lower. It is unlikely that we will hear anything more important today, given Powell's rather harsh stance during his opening speech. Source: xStation5