Fed chair Jerome Powell rolled out a fairly hawkish speech Wednesday, and the markets … rallied?
What happened: Powell spoke at 1:30pm at the Brookings Institution, his last public appearance before the FOMC policy meeting in two weeks.
- He said there's been no "clear progress" toward lower inflation just yet — and that rates may ultimately peak even higher than he thought just a few months ago.
- But in the last paragraph of his prepared remarks, he said the Fed could shrink the size of its rate hikes as soon as its December meeting.
The impact: Markets shot up — the S&P by over 3% and the Nasdaq composite by 4.4%.
Between the lines: Despite Powell's insistence that we haven't seen much progress in the inflation fight, that December comment made waves.
- "The signal that the Fed is going to slow down in December was unambiguous," wrote Krishna Guha of Evercore ISI in a research note.
💭 Our thought bubble, via Neil Irwin: This was not a more fundamentally dovish message than the November FOMC press conference.
- Yes, but: Coming amid the loosening in financial conditions that followed the October CPI release, anything short of the tone of his August Jackson Hole speech — in which he called for more "economic pain" in the fight against inflation — gave investors reason to head back into risk-on mode.