Some of the increase in unemployment reflects a cool-down in the labor market from an overheated stateThe labor market is now roughly in balance and therefore unlikely to be a source of inflationary pressures going forwardIs ready to start the process of rate cutsMonetary policy can be moved to a more neutral stance depending on dataWilliams signals readiness to cut rates: “Appropriate to dial down restrictiveness”Inflation moving “sustainably toward 2%,” boosting confidence in policy effectivenessLabor market “roughly in balance,” no longer a source of inflationary pressureGDP growth forecast: 2-2.5% for current yearUnemployment rate projected at 4.25% by year-end (from 4.220% in today’s jobs report)PCE inflation expected to moderate to 2.25% this year, near 2% next yearPolicy can move to more neutral setting over time, depending on dataFed remains vigilant on risks: U.S. labor market weakness, global slowdown, inflation surprisesFuture policy decisions to remain data-dependent, focused on dual mandate goalsFull text
There isn’t much of a signal here around the 25/50 bps debate and it reads like a boilerplate copy of Powell’s Jackson Hole speech. We will hear from Waller at 11 am ET and that might be a stronger signal.
The topic of the speech was equipoise, which means a state of equilibrium.
Here is the ‘conclusion’ of the speech:
We’ve come a long way from the unacceptably high inflation and
overheated labor market that we experienced two years ago. Monetary
policy has been unequivocally focused on returning inflation to our 2
percent longer-run target. The risks to our two goals are now in better
balance, and policy needs to adjust to reflect that balance. Of
course, one clear lesson of the past several years is that the future
is highly uncertain. Therefore, our decisions will be data-dependent,
with a keen eye on the achievement of our maximum employment and price
stability goals.
This article was written by Adam Button at www.forexlive.com.
