Continuation of the 100th Anniversary Conference of the Division of Statistical Research in Washington DC - speech by Jerome Powell

One of the most watched men in US economics was scheduled to speak at this event on Wednesday and Thursday, 8-9.11.23. I have already added the summary for Wednesday and the markets remained fairly quiet. Today I will add a summary of his speech, a straight talk that sent the markets down slightly towards the end of the trading day yesterday.

Jerome Powell said on Thursday that "the Federal Open Market Committee is committed to a monetary policy stance that is sufficiently restrictive to bring inflation down to 2 percent over time; we are not confident that we have achieved that stance," in his prepared speech.

The speech comes as inflation remains well above the Fed's long-term target, but also well below its peak in the first half of 2022. In a series of 11 rate hikes that represented the most aggressive policy tightening since the early 1980s

Powell said inflation is "well above" where the Fed would like to see it, while he described policy as "significantly restrictive." Further, "my colleagues and I are pleased with this progress, but we expect that the process of bringing inflation down to 2 percent in a sustainable way still has a long way to go," he said. "We will continue to do so until we succeed," he added later, adding that the Fed's focus is on whether rates need to rise and how long they need to stay elevated.

"If it is appropriate to tighten policy further, we will not hesitate to do so," he said. "But we will continue to proceed cautiously, which will allow us to address both the risk of being fooled by a few good months of data and the risk of excessive tightening."

Futures prices, according to CME Group, indicate a less than 10% probability that the FOMC will approve a final rate hike at its Dec. 12-13 meeting. Traders expect the Fed to begin tapering next year, likely around June.

Powell noted the progress the economy has made. Gross domestic product accelerated at a "pretty strong" annualized rate of 4.9% in the third quarter, though Powell said growth is expected to be "moderate" in coming quarters. He described the 2023 economy as "simply remarkable" in the face of a broad consensus that a recession is inevitable.

Unemployment remains low, although the jobless rate has risen by half a percentage point this year, a move commonly associated with recessions. But Powell noted that the Fed is "mindful" that stronger-than-expected growth could undermine the fight against inflation and "warrant a monetary policy response."

Well, we'll see what happens next, it's hard to predict anything, especially when, but there are certainly still risks and judging by history, recessions are still possible. We are slowly approaching the end of the year, I will add charts of the SP500 $^GSPC and Nasdaq100 $^NDX where we can see that this year has been in the black so far according to the indices, but let's not forget what strength the top 7 tech companies have in the indices, which if they weren't, the rest of the index is slightly in negative numbers. Have a good Friday and enjoy your weekend. 😊🍀