Takeaways from the FED's MPC speech Nov 23'

FED chair Powell gave the MPC speech on 1 Nov 23'. Here are some crucial points from his speech:

1. Recent Economic Trends

• Economic Activity:
• Expanding at a fast rate, driven by a surge in consumer spending.
• Housing markets and business investments remain flat

• Labour Market:
• Tight but showing signs of balancing.
• Nominal wage growth is stabilizing.
• Unemployment remains low; job vacancies still exceed supply but have declined overall.

• Inflation:
• Moderating but still above expectations.
• Personal Consumption Expenditures (PCE) inflation: 3.45%, Core PCE: 3.7%.
• Long-term inflation appears well-anchored.

• Financial Conditions:
• Tight labour market could necessitate further monetary tightening.
• Rising long-term yields tighten financial conditions, impacting mortgage rates and broader monetary policy.

• Potential Growth:
• Temporarily higher than the usual 2%, influenced by labour market changes and supply chain dynamics.

• Broader Financial Monitoring:
  • The Fed monitors a wide range of financial conditions, including the dollar level, interest rates, credit spreads, and long-term yields.

2. Monetary Policy Insights

• Policy Stance:
• Monetary policy remains unchanged.

• Policy Dynamics:
• Policies operate with long and variable lags; the committee is actively monitoring these effects.

• Dot Plots:
• Reflect committee members' economic outlooks but are not definitive plans.
• Evolving economic conditions can influence projections between meetings.

• Consumer Sentiments:
  • Referenced the Michigan Sentiment Survey:
    • Highlighted a jump in one-year-ahead expectations.
    • Powell clarified that this was a preliminary estimate later revised.

Click here to listen to the speech