CAPATA

In summary, Powell doubled down on the Committee’s focus on a weakening labor market and its impact on the broader economy. He reiterated that the Committee will ensure one-time price increases driven by tariffs do not evolve into a sustained inflationary process and reaffirmed its commitment to keeping inflation expectations anchored. With the announcement of the end of quantitative tightening on December 1, the Fed has fully aligned its policy tools toward a looser monetary stance. The larger overall balance sheet, combined with the continued conversion of roughly $2 trillion in agency-backed MBS into Treasury securities, will give the Fed greater influence over longer-term rates. By extending the maturity of securities on its balance sheet, the Fed can place downward pressure on longer-term yields, stimulating credit and overall demand more effectively….. Read more

In summary, Powell emphasized that the economy is currently in a solid position, with low unemployment (4.2%), encouraging inflation readings over the past three months, and 12-month PCE inflation at 2.3% as of May. While GDP growth remains positive, it is expected to slow. Taken together, these factors support the Fed’s wait-and-see approach, allowing more time to assess the ultimate size and impact of the tariffs on inflation and the broader economy…. Read more

In summary, the Fed remains in a “wait-and-see” mode, with its policy stance remaining moderately restrictive.  While the Fed is still on hold, it believes that the current stance of monetary policy is flexible enough to be adjusted in response to future deviations from its dual mandate. Notably, the Fed has more room to maneuver… Read more

In summary, Powell emphasized the heightened uncertainty surrounding the future economic impact of the new administration’s policies on trade, immigration, regulation, and fiscal policy.  He noted that while sentiment has turned negative, this shift has not yet appeared in hard data.  The economy remains on solid footing… Read more