Powell focused on balance of risks and the door to easing still open later on
In a unanimous vote, the FOMC left rates unchanged at its May meeting. In line with our expectations, the big news was on the balance-sheet front with the announcement of QT tapering. However, the QT-taper process is actually starting one month earlier than we expected (June vs July). In the prepared remarks and throughout the presser, chair Powell emphasized the importance of anchored “inflation expectations”, which was a new feature introduced at this meeting. There was also a clear attempt at reinforcing the pivot toward a balance of risks approach (versus just worrying about inflation), where the Fed is picking up on some of the cracks that are forming in the jobs market. Lastly, Powell didn’t put hikes on the table and is still focused on when to cut.
Please see the link above for PDF for the full write-up with charts…
