Despite What Powell Says, the Fed Is Likely Done

livemint.com:

housing sector is showing signs of picking back up." There were some hawkish-sounding aspects to what Powell said, including a pledge to raise rates further if necessary, and that appeared to spook investors at first, with stocks falling in early trading. But the substance of what Powell said indicated that if another hike comes, it probably won’t occur when policy makers meet next month. And his assessment that the central bank is now “in a position to proceed carefully," suggests the Fed isn’t in a rush to do much of anything.

Stocks ended the day higher. One reason Powell put the situation the way he did is that even if policy makers suspect they won’t need to raise rates again—especially in consideration of how the full effects of hikes already made have yet to hit the economy—they don’t want to take away the option to raise rates further if inflation heads off in the wrong direction again. Another is that as soon as the Fed says it probably won’t raise rates again, investors’ focus will quickly shift to when the Fed might start cutting.

If they do that, long-term interest rates in particular might start sliding, providing a fresh boost to the economy that policy makers aren’t quite ready for. The more time the Fed leaves open the possibility of raising rates, without actually raising them, the less likely it is that investors will start envisioning a rapid series of rate cuts. And yet the Fed’s next move might, in fact, be to cut rates.