Powell’s 6/14/23 Comments On His Recent Pause

Jun 19, 2023 | Macro Insights, No Bull Economics

Don’t let the Fed pause fool you, they plan for more 2H23 tightening before starting to ease in 2024 & beyond. Given an uncertain lag between tightening & economic decline, it seems that the Fed is comfortable with the real possibility of driving negative GDP shrinkage to get to that mystical 2% inflation rate.

Key Points Summarized

So far, the Fed has raised its policy interest rate by +5% while continuing to reduce its securities holdings.
As the full effects have yet to be felt from its rate hikes (which are further aggravated by tightening bank credit), the Fed decided to leave its policy interest rate unchanged in its recent meeting while continuing to reduce its securities holdings.
Nearly all Committee participants view it as likely that some further rate increases will be appropriate this year to bring inflation down to 2% over time.

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