Powell quotes from the FOMC meeting today

Overall, the FOMC press conference seemed dovish today. I noticed four things in what Jerome Powell said (source):

1. Cutting rates in March is not likely as-of now but the door is open to it. Powell said,

“Based on the meeting today, I would tell you that I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to do that. But that’s to be seen. So I wouldn’t call—you know, when you say—when you ask me about “in the near term,” I’m hearing that as March. I would say I don’t think that’s – that’s probably not the most likely case, or what we would call the base case.”

2. Rates can be cut if real economic growth continues to be strong assuming inflation continues to come down. This was the most surprising to me given that strong growth ultimately causes inflation. It tells me that the Fed WANTS to cut rates and is ignoring real economic data as long as inflation continues to come down. In response to the question, “how are you weighing recent strong growth in consumer spending data against the sort of solid inflation progress you’ve been seeing?”, Powell said,

“In terms of growth, we’ve had strong growth. I mean, if you take a step back, we’ve had strong growth. You had very strong growth last year, going right into the fourth quarter. And yet, we’ve had a very strong labor market and we’ve inflation coming down. So I think, whereas a year ago we were thinking that we needed to see some softening in economic activity, that hasn’t been the case. So I think we look at—we look at stronger growth—we don’t look at it as a problem. I think at this point we want to see strong growth. We want to see a strong labor market. We’re not looking for a weaker labor market. We’re looking for inflation to continue to come down, as it has been coming down for the last six months.”

3. Powell doesn’t think a soft landing is assured. In response to the question “do you feel comfortable at this point saying the economy has reached a soft landing, or is that part of looking for more confidence?”, Powell said,

“No, I wouldn’t—I wouldn’t say we’ve achieved that, and I think we have—we have a ways to go. Inflation is still—you know, core inflation is still well above target on a 12-month basis. Twelve months is our target. Certainly, I’m encouraged and we’re encouraged by the progress, but you know, we’re not—we’re not declaring victory at all at this point. We think we have a ways to go.”

4. The latest Beige book shows a pickup in activity. Powell said,

“I think that what you’re hearing now is things are picking up a bit. You’re hearing—not in every district and not every person that we talk to but your overall it feels like you’re hearing things picking up at the margin. So that’s what comes through.”

My general take-away is that the Fed is trying to find an excuse to lower rates. If they get enough “cover” from the inflation data by the March meeting, they could begin to lower then.