Fed's Powell:"My forecast is for slower growth,some softening in labor market conditions and inflation moving down steadily but not quickly...if the economy performs broadly in line with those expectations,it will not be appropriate to cut rates this year."@federalreserve @CNBC— Bob Pisani (@BobPisani) February 1, 2023
But it was also noteworthy that Powell mentioned a "disinflationary process has now started", which was nice to read, since it acknowledges the reality that inflation is already getting under control, and there is little need to go much further on rate hikes. Wall Street definitely took notice of Powell's press conference, which started around 2:30 Eastern time.
Federal Reserve Chair Jerome Powell, moments ago:— David Gura (@davidgura) February 1, 2023
"My base case is the economy can return to two percent inflation without a really significant downturn."
So does the Fed feel the job market is too good and needs to keep hiking to stop the threat of wages continuing to go up (the horror!)? Or do they back off, admit there is a slowdown that is clearly happening in many areas, and back off before we fall into recession? And is Wall Street going to reverse its strong January and Feb 1 performance if they get indications that their cocaine party won't be coming back?
But US manufacturing fell for a fifth straight month, deeper into contraction territory. “Production weakened and new orders continued to fall. Employment remained in expansion territory, a sign that companies are holding onto employees despite recession fears:” @OxfordEconomics— Lisa Abramowicz (@lisaabramowicz1) February 1, 2023
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