Ok, after reading the July FOMC policy statement and then listening to Chairman Powell’s follow-up presser, I came to one conclusion: Powell wants it both ways. 

Here’s what I mean:

• The July FOMC policy statement read a bit more hawkish than one might have expected. It acknowledged that "with progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen"—while also stating that "the path of the economy continues to depend on the course of the virus."

• Number 1: There is no mention of the delta variant!

• Number 2: The Fed acknowledged that, in terms of reaching their economic and price stability goals, the economy has made progress.

• That is Fed-speak for “the tapering discussion has begun in a more earnest fashion,” a point Powell reiterated in his presser.

• At that presser, Powell did mention 1) delta as a potential economic impact BUT then went on to say, he’s “seen fewer economic implications from each virus wave,” 2) the FOMC discussed “considerations on bond-buying” BUT “we’re some ways away from progress on jobs” and “clearly a ways away from raising interest rates,” 3) he still sees inflation as transitory BUT it’s “possible inflation will be higher and more persistent than expected.”

Got all that? That’s what I meant in my opening statement.

BOTTOM LINE: The Fed is on target to announce a more formal tapering announcement perhaps at their September 22 meeting, and the markets will be watching Powell’s expected Jackson Hole appearance (August 26–28) for any clues as to what may be coming. Also, at the September FOMC meeting, the Fed’s updated blue dots (Fed Funds estimates) are due…I’ll be watching very closely to see if the current 2023 rate hike ‘lift off’ is adjusted toward 2022.

In the meantime, most analysis that I’ve seen shows the U.S. 10-Year Treasury yield is still below fair value, with reading between 1.50% and 1.60% appearing to reflect a better equilibrium level.