By Wong Kon How
As an investor, one of the most important conferences or seminars we should attend is the press conference after each FOMC meeting. The reporters will have their translation, but I prefer to hear from Jerome Powell himself, as it provides information on what the Fed is thinking.
It is a 28-page transcript taken on 27th July, and I have highlighted some of his key statements.
"My colleagues and I remain squarely focused on our dual mandate to promote maximum employment and stable prices for the American people"
Looking ahead, we will continue to take a data-dependent approach in determining the extent of additional policy firming that may be appropriate.
Inflation remains well above our longer-run goal of 2 percent. Over the 12 months… Nonetheless, the process of getting inflation back down to 2 percent has a long way to go, ending in May, total PCE prices rose 3.8 percent; excluding the volatile food and energy categories, core PCE prices rose 4.6 percent
"We will continue to make our decisions meeting by meeting, based on the totality of incoming data and their implications for the outlook for economic activity and inflation as well as the balance of risks."
"We'll be looking at inflation, we'll be asking ourselves; does this whole collection of data, do we assess it as suggesting that we need to raise rates further? And if we make that conclusion, then we will go ahead and raise rates"
the overall resilience of the economy, the fact that we've been able to achieve disinflation so far without any meaningful negative impact on the labor market, the strength of the economy overall, that's a good thing
we're going to do in September, we're going to look at two additional job reports, two additional CPI reports, lots of activity data, and that's what we're going to look at and we're going to make that decision then.
core inflation is still pretty elevated, you know? There's reason to think it can come down now, but it's still quite elevated and so we think we need to stay on task, and we think we're going to need to hold, certainly hold policy at restrictive levels for some time. And we need to be prepared to raise further if we think that's appropriate.
The worst outcome for everyone, of course, would be not to deal with inflation now, not get it done, whatever the short-term social cost of getting inflation under control, the longer-term social costs of failing to do so are greater and the historical record is very, very clear on that. If you go through a period where inflation expectations are not anchored, inflation is volatile, it interferes with people's lives and with economic activity and you know, that's the thing we really need to avoid and will avoid
So that's how I think about it. I mean if I sum it up, I would say; we've come a long way, we are resolutely committed to returning inflation to our 2 percent goal over time. Inflation has proved, repeatedly has proved stronger than we and other forecasters have expected and at some point that may change. We have to be ready to follow the data and given how far we've come, we can afford to be a little patient as well as resolute as we let this unfold.
many people wrote down rate cuts for next year. I think the meeting was several for next year. And that's just going to be a judgment that we have to make then, a full year from now and it'll be about how confident we are that inflation is in fact coming down to our 2 percent goal.