Harkster Preview - FOMC
Today’s focus... What does Jay (soft landing) Powell need to do to be nominated as Time "Person of the Year"?
Consensus: Rates on hold, JPow to repeat the message he gave during his fireside chat at Spelman college (BIS)... #datadependent, #higherforlonger, flexibility to respond to the incoming data is key, balanced risks between UER/inflation and inflation has eased but it is still too high for too long.
The economy has slowed from its Q3 peak to below par growth in Q4 without a material weakness in the labour market and a positive disinflation trend. As the soft-landing approaches, it begs the question, what does Powell need to do to be nominated as Time "Person of the Year"?
The committee has refused to even talk about the prospect of cuts. Apparently, the Fed are wary of re-igniting inflation so they want to maintain a "higher for longer" stance to help cap financial conditions, but that same stance is now in conflict to the softening in data that has led markets to price 4/5 cuts next year. The markets repricing of the risk-free rate has already fuelled an everything rally (WSJ - When Bond Yields Dropped, the Everything Rally Kicked Off). So, what would now happen if the Fed simply agreed?