Fed interest rate increase in February 2023
Powell’s focus is the labor market, says Gary Cohn
Federal Reserve Chairman Jerome Powell made it clear during his press conference that the data the Fed is watching closely more than anything else is jobs data, former Goldman Sachs CEO Gary Cohn said.
“He went back and forth and gave you both sides of the argument,” said Cohn, a former economic adviser in the Trump administration. “The only thing he had in his hat was the job market. At this point it feels like we’re just dependent on work.”
Don’t expect a rate cut in 2023, says Powell
Jerome Powell said he does not expect the Fed to cut interest rates this year, as some major strategists are betting.
“Given our outlook, I don’t see us cutting rates this year, if our outlook comes true,” the Fed chairman said.
Powell also said he was “not worried” about the bond market implying one more cut before a pause, because some market participants expect inflation to fall faster than the Fed does.
“If we see inflation coming down much faster, that will obviously play into our policy,” Powell said.
The Fed meeting leaned “a bit dovish”, says investment strategist
The central bank is nearing the end of its rate hike campaign and was more due this meeting, according to Charlie Ripley, senior investment strategist for Allianz Investment Management.
A lack of clarity about future interest rate moves signals that the Fed is nearing the end of this rate-tightening cycle, Ripley said. After the hike ended, he said the central bank was likely to “sit tight while economic data catches up with policy.”
“The Fed is essentially talking out of both sides of its mouth when it signaled that further increases are appropriate, but also acknowledged that it will consider the cumulative amount of tightening in future policy decisions,” he said.
Ripley added that the slowing pace of current interest rate hikes to 25 basis points is a “clear sign” that the central bank is more confident that current economic policy is having the intended effect of tightening.
All in all, Ripley said, the meeting “rocked a bit”.
– Alex Harring
Powell expects growth at a “subdued pace” in 2023
Fed Chair Jerome Powell is preparing for growth this year, albeit at a “moderated pace”.
“My base case is that there will be positive growth this year,” he said during a press conference on Wednesday.
– Samantha Subin
Powell Says Fed Funds Rate Stays Below 5% ‘Absolutely Possible’
In response to a question from CNBC’s Steve Liesman, Chairman Jerome Powell said it is “certainly possible” that the Fed will keep its benchmark interest rate below 5%. The Fed’s latest hike brings the federal funds rate to a range of 4.50% to 4.75%.
Powell also said he still believes the Fed can get inflation back to 2% “without a really significant decline, or a really significant increase in unemployment.”
The disinflation process has started, says Powell
“We can now say I think for the first time that the disinflation process has started. We can see it and we really see it in commodity prices so far,” Fed Chairman Jerome Powell said at a press conference on Wednesday.
— Fred Imbert
Powell says it is “too early to declare victory” on inflation
Inflation is easing in some areas of the market, but it is too early for the Federal Reserve to say the battle is won, Fed Chairman Jerome Powell said.
“It would be too soon,” he said. “It would be very premature to declare victory, or to believe that we have really pulled this off.”
The disinflation process, he said, is in its early stages, but “the job is not quite done.” Core services excluding housing have yet to experience disinflation, he added.
Powell also expects inflation to continue to move up in housing services, before easing.
– Samantha Subin
Powell says more rate hikes ahead to bring down inflation
Fed Chairman Jerome Powell said the central bank could implement a few more rate hikes to bring inflation down to the target.
“We’ve raised rates by four and a half percentage points, and we’re talking about a couple more rate hikes to get to the level that we think is appropriately restrictive,” Powell said. “Why do we think it’s probably necessary? We think because inflation is still very hot.”
– Yun Li
The Fed is giving itself some leeway for future policy moves, says Evercore ISI
“We believe the committee is signaling that it has not yet seen enough to weigh a pause and remains oriented towards two more hikes – but leaves open the prospect that further cumulative information that continues to support disinflation over the next two months could lead to the FOMC to take a break after March, skip May and see how the second-quarter data develops before deciding whether or not to implement a final hike in June,” Evercore ISI Deputy Chairman Krishna Guha said on Wednesday.
Powell says the Fed hasn’t hit on a ‘sufficiently restrictive policy’ yet
Despite the Federal Reserve’s aggressive rate hike campaign, the central bank has more work to do, according to Fed Chairman Jerome Powell.
“I would say that our focus is not on short-term moves, but on sustained changes in broader financial conditions,” he said during Wednesday’s news conference. “And it is our view that we do not yet have a sufficiently restrictive policy, which is why we say we expect ongoing increases.”
– Samantha Subin
The economy is still in the “early phase” of easing inflation, Powell says
Powell acknowledged that there have been positive signs in recent employment reports even as labor data has remained strong, but said it was too early to celebrate.
“It’s a good thing that the disinflation that we’ve seen so far has not come at the expense of the labor market,” Powell said, but added that the economy was still in an “early stage” of curbing inflation.
He said a decline in commodity prices and data showing a recent softening of the rental housing market is a “good story.”
However, he said the Fed is not “seeing disinflation yet” in the core services portion of inflation, excluding housing.
Inflation and the Fed’s fight against it is not over, says economist
Market participants should not expect rate cuts later this year from the Federal Reserve, suggested Jose Torres, senior economist at Interactive Brokers.
“While goods are experiencing sharp disinflation, commodities and services are actually accelerating, despite headlines screaming cooler inflation. In fact, the Cleveland Fed’s headline CPI from the Cleveland Fed has it running at 7.6% year-over-year. Furthermore, today’s unemployment data suggests an incredibly robust labor market,” he says. “Inflation is not over, and neither is the Fed’s fight against it.”
Powell begins with an aggressive stance against inflation
Jerome Powell has started his press conference by confirming the central bank’s stance in the fight against inflation.
Powell repeated comments from previous appearances. He said the Fed remained “strongly committed” to bringing down inflation, reiterating the statement about ongoing rate hikes and stressing the problems inflation could cause for consumers and the labor market.
“Without price stability, the economy doesn’t work for anybody,” Powell said.
Expect a hawkish Powell after minor changes to the statement, says Boockvar
Peter Boockvar, chief investment officer at Bleakley Advisory Group, said the minor changes in the Fed statement should not come as a surprise to the market. However, he said Chairman Jerome Powell is likely to take an aggressive stance against inflation at his press conference.
Powell has been intent on making the FOMC statements as uneventful as possible, and today was really no different with the slight changes indicated by mentioning inflation moderation but still “high” rates. I think Powell in the presser will remain with the boot on the neck of inflation, but we know he’s not really going to press down any further except maybe one more time,” Boockvar said in a note.
The Fed is waiting too long to stop interest rate increases, says JPMorgan’s David Kelly
JPMorgan Asset Management’s David Kelly has long said that the Federal Reserve traditionally starts reacting to economic conditions too late, goes too high with increases and stays too long.
“They say they recognize the long lags with which monetary policy affects the economy, but with inflation falling and consumer spending falling, with industrial production falling, they’re still raising interest rates. It’s obviously too long to wait,” Kelly said. the firm’s global chief strategist.
The Fed’s statement after the meeting said officials will determine the size of future hikes based on factors such as the effects so far of rate hikes, the backlog on which policy is having an impact, and developments in financial conditions and the economy.
The Fed might prefer a recession, says portfolio manager
Brandywine Global portfolio manager Bill Zox isn’t convinced the Federal Reserve is even attempting a soft landing.
A soft landing would mean that the central bank slows down the economy and tames inflation while preventing a recession.
“Although they would never say it, they might prefer the restorative aspects of a recession and a real bear market,” he said shortly after the Fed raised interest rates again.
Something for the doves: Fed says inflation has ‘declined somewhat’
The Federal Reserve vowed to continue to fight high inflation on Wednesday, raising interest rates by 25 basis points. However, some market participants may balk at part of the Fed’s latest statement that said inflation “has moderated somewhat but remains high.”
That remark appeared to help the major stock averages out of their lower sessions.
— Fred Imbert, Jeff Cox
Fed statement still points to ‘ongoing increases’
The Federal Open Market Committee’s latest statement left some key language unchanged, which may have contributed to the immediate negative reaction for stocks.
The committee’s statement nevertheless reads that “ongoing increases in the target area will be appropriate”.
Elsewhere, the new statement added that inflation “has moderated somewhat.”
See the rest of the changes here.
Shares fall to session lows after Fed decision
The major US stock averages briefly fell to their session lows on Wednesday following the release of the Fed’s latest monetary policy announcement. The Dow was last down more than 300 points, or 1%. The S&P 500 and Nasdaq were down 0.5% and 0.3% respectively.
The Federal Reserve is increasing by 25 basis points, but expects “ongoing” increases
The Federal Reserve raised its benchmark overnight lending rate by 25 basis points, or 0.25 percentage points, in line with investor expectations. The increase brings the Fed’s target range to 4.5%-4.75%, the highest level since 2007.
In its statement, however, the Fed noted that the FOMC still sees the need for “ongoing increases in the target range.” Market players had hoped for a softening of the term, but the statement, which was approved unanimously, kept it intact.
Where the markets stand before the Fed
Here’s a snapshot of where financial markets are heading into the Fed announcement at 2:00 PM ET:
(Numbers as of 1:45 p.m. ET)
— Fred Imbert
Potential winners from a Fed break
The Fed has been raising interest rates since last March, squeezing the broader market as it tries to fend off rising inflation. However, some of the stocks hardest hit by rate hikes could be big winners if the Fed hints at a pause.
CNBC Pro looked back at the stocks that were hit the hardest in the five trading days after each of last year’s Fed rate hikes, starting with the first-quarter hike last March. Of these, we took the worst median performance over the five-day period for each of 2022’s seven rate hikes.
Among these stocks are Paramount Global, Disneyand Warner Bros. Discovery.
—Michelle Fox, Fred Imbert
What to expect from the Fed
Markets have priced in a near 100% certainty that the Federal Open Market Committee will announce a 0.25 percentage point rate hike to conclude its first policy meeting in 2023.
What the markets are uncertain about is where the Fed goes from here. Traders are betting that the central bank will hike another quarter of a point in March, then stop, take a break for several months, and then start cutting towards the end of the year.
Aware that the fight against inflation is far from over, Chairman Jerome Powell may push back on the idea of a looser Fed as soon as in the future.