Fed Chair Powell: Elevated inflation is not the only risk we face | Forexlive

• Reducing restraint too late or too little could unduly weaken economy and job market
• the risks to achieving our employment and inflation goals are coming into better balance
• More good data would strengthen our confidence on inflation
• Rate cut not appropriate until Fed gains greater confidence inflation headed sustainably toward 2%
• Q1 data didn’t support greater confidence
• We continue to make decisions meeting by meeting
• Recent monthly readings on inflation show ‘modest further progress’
• Labor market conditions have ‘cooled while remaining strong’ and ‘not overheated’
• US economy expanding at a ‘solid pace’
• Full text

The Fed will get there more inflation reports before the Sept FOMC decision, including one later this week. This speech doesn’t offer much of a hint on when the Fed will cut rates and pricing for the Sept 18 meeting remains at 78%. By this time next year, the market is pricing in 119 bps of easing.

Quotables:

“The most recent inflation readings, however, have shown some modest further progress, and more good data would strengthen our confidence that inflation is moving sustainably toward 2 percent.”

“At the same time, in light of the progress made both in lowering inflation and in cooling the labor market over the past two years, elevated inflation is not the only risk we face.”

The US dollar strengthened slightly on these comments. There isn’t much different here from what we heard in Sintra last week. I think some in the market may have been looking for a more-dovish message but he’s largely non-committal.