Powell maintains 'hawkish tilt' at Jackson Hole
investmentweek.co.ukFed chair Jerome Powell spoke at the Jackson Hole symposium last week.
While Powell acknowledged inflation in the US was well past its peak, he warned that it still remained «too high», and rates could remain higher for longer.
«We are prepared to raise rates further, if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective,» the Fed chair added.
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Jason England, fixed income portfolio manager at Janus Henderson, noted the contrast between Powell's «Volkeresque hawkish speech» last year, and a «less stern» one this time, though still with a «hawkish tilt».
«Powell noted that despite recent more favourable inflation data, the process still has a long way to go, and two months of good data is only the beginning,» England said.
Whitney Watson, co-head and co-CIO of fixed income and liquidity solutions for Goldman Sachs Asset Management, agreed, arguing Powell refused to send a «strong signal on near term policy», instead preferring to emphasise data.
Powell indirectly acknowledged the fact that economic resilience may imply the neutral rate is higher than estimates in the short-run, Watson said, though also emphasised the uncertainty of the lagged impact of policy.
There was likely to be «significant further drag in the pipeline», the Fed chair said last week, but the central bank was focused on the upside risk of inflation.
«Big picture, we believe the sentiment was consistent with a higher-for-longer rate regime as opposed to additional near-term tightening,» Watson concluded.
Powell also «made it clear» that the Fed intended to stick to its 2%
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