The Fed’s live Press conference was interesting. I made some notes. The video starts at ~ the 1 hour mark. Skip forward to that point.

Powell Comments

• Its a “challenging, unusual situation”. It’s unusual because inflation normally declines with weak labor markets.
• The balance of risks has shifted from inflation to the labor markets. Tariff-related inflation is observable in goods but passthrough has been low, so far. The Fed is open to the possibility of higher inflation passthrough.
• Powell declined to comment on Trump’s new Fed appointee, Stephen Miran.
• Policy path is not pre-determined.
• “Think of this as a risk-management cut. There are no risk-free paths. It’s not obvious what to do.”
• Job creation is below the break-even point. Unemployment is ticking up, but from a low level.
• Consumption is stronger than expected.
• “The risks to the labor markets were the focus of today’s decision.”
• Housing is a secular problem the Fed cannot control.
• No one on the Fed has great confidence in their forecasts.
• The Fed is aware of rising default rates but it’s not a big problem yet.
• In response to a question on bubbles and the stock market, Powell responded: “We don’t have a view” on asset prices. The Fed is concerned with its dual mandate.

The comment on bubbles is telling. The Fed blows them repeatedly then cleans up the mess it makes.

It was the Fed who created the housing mess by holding rates too low, too long, and unwarranted QE. Powell denies all responsibility.

And once again the Fed does not see the bubbles it has created.

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