Powell explains grounds of Fed’s dovish stance

FOMC Chairman Jerome Powell comments on the policy outlook after the Federal Reserve’s decision to raise the policy rate by 25 basis points to the range of 5-5.25% following the May policy meeting.

The US dollar and the Dollar Index (DXY) struggled to find demand during the American trading hours on Tuesday. Investors lean towards a dovish tilt in the Federal Reserve’s policy outlook, with the Fed raising its policy rate by 25 bps and dropping language saying it anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time.

This dovish tone has caused the USD selloff to pick up steam in the late American session. Market participants are growing increasingly concerned about the US economy tipping into recession and see the Fed pausing its tightening cycle in response.

Key Quotes

“Conditions in banking sector have broadly improved.”

“US banking system is sound and resilient.”

“Committed to learning right lessons.”

“Focus remains on dual mandate.”

“Strongly committed to bringing inflation back down to 2%.”

“Without price stability will not achieve sustained strong Labour market.”

“We will take a data-dependent approach from here.”

“Activity in housing sector remains weak.”

“Labour market remains very tight.”

“Some signs that supply and demand in Labour market coming back into better balance.”

“Nominal wage growth has shown signs of easing.”

“Inflation has moderated somewhat.”

Inflation pressures continue to run high.”

“Have a long way to go to bring down inflation.”

“Highly attentive to risks of inflation to both sides of mandate.”

“We are seeing the effects of policy tightening, particularly in housing and investment.”

“Will take time for full effects of monetary restraint to be realize.”

“Economy is likely to face headwinds from credit conditions.”

“Strains from banking sector resulting in tighter conditions.”

“Extent of effects is uncertain.”

“Strains from banking system in March is resulting in even tighter conditions.”

“Our future policy actions will depend on how events unfold.”

“We will make rate determination meeting by meeting.”

“We are prepared to do more if more is warranted.”

“Reducing inflation likely to require period of below trend growth, softer labor market.”

“Restoring price stability is essential.”