Fed’s Powell : Disinflationary process is in early stages

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 4.5-4.75% following the first policy meeting of 2023.

Key Quotes

“Very difficult to manage the risk of doing too little on rates.”

“We don’t want inflation springing back.”

“We have no desire to overtighten, but we have tools that would work on that if we do.”

“It would be very premature to declare victory on inflation.”

“Until we see all aspects of inflation coming down, we still have a lot of work to do.”

“We can now say for first time that disinflationary process has started, we see it in goods sector.”

“But that’s around 1/4 of the PCE Price Index.”

“We see disinflation in the pipeline for housing.”

“We expect to see that disinflation process will be seen soon in the core services ex-housing, but we don’t see it yet.”

“Labor market will probably important to bring that aspect of inflation down.”

“We’re talking about a couple more rate hikes to get to appropriately restrictive stance.”

“We are not very far from that level.”

“Policy is restrictive, trying to judge about how much is restrictive enough.”

“It is a good thing that disinflation so far has not come at expense of labor market.”

“But this disinflationary process is in early stages.”

“In housing services, we expect inflation to continue moving up but then moving down as new leases come in lower.”

“But in core services ex-housing we don’t see disinflation yet.”

“It’s gratifying to see disinflationary process underway, with continued strong labor market.”

“Employment Cost Index and Average Hourly Earnings have abated somewhat, although still fairly elevated.”

“We see wages moving down.”

“By many many indicators job market is still very strong.”