'Nearly all' Fed officials see more hikes appropriate this year: Powell press conference
"Nearly all policymakers" view that some further rate hikes will be appropriate this year, Federal Reserve Chair Jerome Powell said during his press conference Wednesday after the central bank kept its key rate unchanged, breaking its streak of 10 straight hikes in 14 months.
In the Federal Open Market Committee's economic projections, the median expectation for the 2023-end federal funds rate increased to 5.6% from 5.1% at their March meeting.
At the end of the press conference, the Nasdaq rose 0.3%, the S&P +0.1%, and the Dow -0.6%. The 10-year Treasury yield is at 3.81% compared with 3.82% soon after the Fed announced its rate decision.
3:18 PM ET: The Fed is watching commercial real estate very carefully, he said. Much of that is in smaller banks, but it's well distributed. Those banks that do have a high concentration of CRE loans will be hurt the most. "It feels like it's something that will be around for some time," Powell said.
"We have responsibility for financial stability as well and that's a factor we'll always be considering," he said, ending the press conference.
3:16 PM ET: Dynamics in the labor market "are about as central to our discussion" as any topic, Powell said. But they don't discuss much in terms of strikes. The FOMC is most concerned with service-sector inflation, which as been persistent.
3:11 PM ET: "It will not be appropriate" to cut rates this year. Powell pointed out that none of the FOMC members projected a rate cut for 2023.
3:09 PM ET: "I continue to think — and this hasn't changed — that there's a path" to a soft landing, Powell said. "The committee is completely unified" in its goal to bring inflation down to 2% and will do whatever it takes to get there.
3:03 PM ET: "We'll be monitoring market conditions as the Treasury replenishes the TGA (Treasury General Account)." The Fed will also monitor money market conditions, he said. Powell doesn't think that reserves will become scarce during the year.
3:02 PM ET: "We don't go out of our way to surprise the market or the public," but the Fed's focus is on getting policy right, Powell said.
2:58 PM ET: Looking at core PCE inflation over the past six months, there hasn't been a lot of progress. "We want to see core PCE moving down decisively," he said.
"At the front and center of the Fed’s 'hawkish' pause is the sticky Core PCE, which has remained consistently above 4.5% and has not made much progress this year," said Yimin Xu on behalf of Cestrian Capital Research. "However, the market remains in a tug of war with the Fed, with the Fed Funds futures still pointing to only one more hike in July this year. Therefore, there is huge pressure on the upcoming inflation data, especially from the non-housing services sectors, in determining how far the Fed really goes. (Added at 3:14 PM ET).
2:55 PM: In discussing the lag effects of policy: "There's no certainty or agreement in the profession" about how long the lag is between rate moves and their full effect is felt in the economy.
2:52 PM ET: Over time, the balance of risks has moved "much closer to our destination," meaning a "sufficiently restrictive" stance. The risks to inflation, though, remain to the upside.
2:50 PM ET: Powell, who said the rate decision shouldn't be called a skip, said part of the reasoning behind today's decision is that the policymakers don't yet know the full extent of the banking turmoil consequences.
2:46 PM ET: The "things are in place that we need to see," but it's going to take "some time" for inflation to come down."
2:42 PM ET: The main issue is the extent of additional policy firming needed to bring inflation down to 2% over time. "It may make sense to raise rates higher but at a slower pace," he said.
There's been no decision made to raise rates at every other meeting or any other kind of pace. And no decision has been made about the July meeting, he said.
He expects that July will be a "live" meeting.
2:40 PM ET: The Federal Open Market Committee will make decisions "meeting by meeting," which means the central bankers aren't likely to signal what they expect the next meeting's action will be.
Updated at 2:38 PM ET: Bringing inflation back to 2% still has a "long way to go," he said.
"Considering how far and how fast we've moved," the Fed officials considered it "prudent" to keep the rate unchanged at this meeting, Powell said.
Housing and investment have shown the biggest effects from the Fed's policy tightening. It will take time for other sectors to see the effects of higher interest rates.
Earlier, Federal Reserve holds interest rate steady for June, skipping a hike.
Source: Seeking Alpha
