Powell gets more cautious on inflation


Powell's comments on Oct 23 crashed XAU & XAG and pushed rates expectations higher. The key phrase was mentioned exactly at 11:08 NY time: If we were to see a serious risk of inflation moving up persistently to higher levels, we would certainly use our tools to preserve price stability.

The market's reaction was imminent:

  • Gold fell 1.6%
  • Silver plummeted 2.5%,
  • S&P index lost 0.6%

Here's a summary of key phrases mentioned during the BIS-SARB Centenary Conference Panel Discussion:

  • Supply side constraints got worse
  • We have labor supply issues nd upward pressure on energy prices
  • Elevated inflation is likely to last longer 
  • If we were to see a serious risk of inflation moving up persistently to higher levels, we woud certainly use our tools to preserve price stability 
  • Labor market is tight by many measures
  • Employment market is 5 million below pre-pandemic level and 7 million below the trend
  • It would be premature to tighet policy now before we have the level of jobs we had in 2020
  • We need to be patient but watching very carefully
  • Risks are clearly now in longer and persistent bottlenecks and thus to higher inflation
  • No one should doubt that we will use our tools to guide inflation back down to 2%
  • As you may recall over last summer we were having a million new jobs per month, if we get back to anything close to that we will fairly quickly be absorbing the remaining slack 
     

The full conference can be watched on the official YouTube channel of the Federal Reserve Bank.