Federal Reserve Chair Discusses Various Topics Including Employment, Inflation, Growth, and Policy –

Below is a summary of the comments from the Fed Chair Powell according to topics

Employment and Labor Market:

• There is a continuing strong pace of job growth.
• Signs of labor supply and demand are coming into better balance.
• Labor demand substantially exceeds supply.
• Unemployment rate at the same level as lift off is seen as a real blessing.
• Some softening in labor conditions is expected.
• It’s been observed that the softening is not through higher unemployment, but through fewer job openings and resignations.

Inflation:

• Inflation has moderated somewhat but remains well above the long-run goal of 2%.
• The process of getting inflation back to 2% still has a long way to go.
• June CPI data was welcome but is seen as only one month’s report. Looking for the signal from this to be replicated.
• Headline inflation has come down sharply as energy and food prices have come down.
• Housing inflation has started to work its way down.
• It’s expected to see core inflation come down as it is still elevated.
• The overall picture is of tighter and still tightening credit conditions.

Economic Growth:

• Growth in consumer spending has slowed from earlier in the year.
• The housing sector has picked up, though it is still below 2022 levels.
• A growth at moderate or modest levels is preferred.
• Stronger growth over time could add to inflation and may require a policy response.

Monetary Policy:

• Decisions are made on a meeting-by-meeting basis.
• The committee will take into account the cumulative effects of monetary policy and the lags along with economic and financial developments.
• The intermeeting data came in broadly in line with expectations.
• Monetary policy is believed to be restrictive and is putting downward pressure on economic growth and inflation.
• The active tool of monetary policy is rates. The September decision could be another hike or remaining where we are, depending on the data.

Future Outlook:

• Expecting to hold policy at restrictive levels for some time to deal with inflation.
• If incoming data suggests more hikes are needed, the committee is prepared to act.
• Policy is working about as expected with overall resilience of the economy.
• It’s hoped that inflation will follow a lower path to be consistent with the CPI data.

Financial Stability:

• There is a lot of uncertainty about outlook to next meeting let alone next year.
• Things have stabilized in the banking system. Overall it remains strong and resilient but still being watched carefully.
• The economy is seen to be weathering the banking turmoil quite well.
• Banks are now working to see they are ready to use the discount window.

Wages:

• The Fed is not targeting wage inflation and won’t comment on union negotiations.
• It is preferred to see wage growth at a rate consistent with 2% inflation over time.
• Wages were not seen as an important cause of inflation early but are an important part of bringing inflation down now.

US stocks are mixed after his press conference:

• Dow industrial average is up 12.59 points or 0.04% at 35451.55
• S&P index is down minus 9.65 points or -0.21% at 4557.99
• NASDAQ index is down -47 points or -0.34% at 14095.74

In the US debt market:

• 2 year yield 4.845%, -4.8 basis points
• 5 year yield 4.105% -6.9 basis points
• 10 year yield 3.86% -5.3 basis points
• 30 year yield 3.932% -2.0 basis points

In other markets:

• Crude oil is down $0.82 or -1.03% at $78.81
• Gold is up $8 or 0.41% at $1972.78
• Silver is up $0.19 or 0.79% at $24.88
• Bitcoin is trading modestly higher $29,338

In the forex:

• EURUSD: The EURUSD moved up to test the broken 38.2% retracement at 1.1106 and is currently trading right around the broken 100-hour moving average of 1.10897. The price traded above and below the 100-hour moving average during his press conference with a low of around 1.1055, and a high of 1.1106.
• GBPUSD: The GBPUSD traded as low as 1.2900 and as high as 1.2960. The price moved back above the broken 38.2% retracement at 1.29311 and above the 100-hour moving average of 1.29433 in the process. The current price trades just above the 200-hour moving average at 1.2946.
• USDJPY: The USDJPY moved down to test the rising 200 hour MA at 140.025. The price low reached 139.92 but has a bounce back and currently trades at 140.183.