BofA with a wrap on Jay Powell last night.
Volker has left the building: Hoping for painless disinflation
In remarks today at The Economic Club of Washington, DC, Chair Powell said that the stellar January employment report did not fundamentally change his view about the outlook for monetary policy, though it did“underscore” his belief that reducing inflation to the 2% target would likely “take time” and involve“ongoing rate hikes.” He added that continued strong employment gains could mean a peak policy rate above where markets are currently pricing (circa 5.0-5.25% based on federal funds futures contracts). As he did during the press conference following the February FOMC meeting, Powell clearly stated that he believes the disinflation process has begun. That said, he emphasized that it is only clear in goods prices, which are only 25% of core CPI, while the process has yet to show through in services inflation. He said he continues to expect that housing services inflation will slow “in the second half of this year” and non-shelter services inflation will cool when wage growth cools. In addition, he said non-shelter services inflation is his “biggest worry” when it comes to the outlook for inflation.
