PRIMER: Fed Chair Powell to participate in a panel discussion on 'Perspectives on Monetary Policy' on Friday at 16:00BST/11:00EDT

CHAIR POWELL PREVIEW: The data docket is thin on Friday, and that leaves the attention on the heavy amount of Fedspeak that is due today. The highlight is remarks due from Fed Chair Powell, who has not spoken since the May FOMC meeting, and will be participating in a discussion with former Fed Chair Bernanke on ‘Perspectives on Monetary Policy’.

RECAP OF POWELL’S COMMENTS: At his post-meeting press conference, Chair Powell reiterated that the central bank was committed to bringing inflation down to 2% and that the Fed was taking a data-dependent approach to rate hikes, adding that the Fed believes it may be near the end of the rate-hiking cycle. Powell revealed that some policymakers had discussed pausing rate hikes, but not at the May meeting. He emphasised that cutting rates would not be appropriate soon. Meanwhile, Powell said that the banking sector had improved, and banks were tightening lending standards, with the pace of lending slower. In future meetings, the Fed will be focussing on credit tightening in its assessment, and determining whether the policy stance is sufficiently restrictive. He added that more data was needed to determine if the Fed has reached a sufficiently restrictive stance. Powell also said that inflation was still high, and is unlikely to come down quickly. Inflation remains higher than desired, although it has moderated somewhat. The labour market is tight but it is showing signs of balance, with nominal wage growth easing. Non-housing services inflation has not changed significantly, while activity in the housing sector remains weak.

FED COMMENTARY IS BECOMING MORE NUANCED: Some have been noting some subtle changes in recent Fedspeak, where a divergence of views could be emerging. Fed's Williams (perma voter) was advocating for a wait-and-see approach on rates, Fed Governor Bowman took a hawkish tone, saying additional rate hikes are likely appropriate. Goolsbee (voter) said it was too soon to be talking about the Committee's next decision, but he was cautious about the May 25bp hike (which he ultimately voted for). Kashkari (voter) said the Fed has more work to do, while Bostic (2024 voter) said there was still a ways to go to beat inflation. On Thursday, Fed’s Logan (voter) argued that the data does not yet show that skipping a rate hike in June is appropriate, while Fed Vice Chair nominee Jefferson spoke about how inflation remained too high, but a year was not enough time to assess the full impact of hikes thus far.

18 May 2023 - 14:50- Fixed IncomeEconomic Commentary- Source: Newsquawk