Powell Delivers Masterful Performance At a Difficult Time
The Federal Reserve chair needed to prep markets for a coming slowdown in rate increases without loosening financial conditions. He pulled it off.
Federal Reserve Chair Jerome Powell has his message down pat.
Photographer: Chip Somodevilla/Getty Images
Federal Reserve Chair Jerome Powell managed to thread the needle. After unwittingly igniting several rallies in stocks and bonds with his mixed messages on the path of interest rates earlier this year, Powell this time was able to capture the nuance needed to to explain the increasingly fraught path of monetary policy from here. So not only did he suggest the central bank is on the cusp of slowing the pace of rate increases — one for the doves — he also said the rate at where the Fed ultimately ends up is likely to be higher than policymakers forecast in September — one for the hawks. Not an easy message to deliver, but one that came across loud and clear.
The key challenge, of course, was in prepping financial markets for the coming slowdown in the pace of rate increases after the Federal Open Market Committee raised its target for the federal funds rate by 75 basis points for the third straight time, to a range of 3.75% to 4%. Policy makers correctly feared that such a message risked talk of a Fed “pivot” and triggering another rally in stocks and bonds, which could have eased financial conditions and worked against their fight to tame inflation. The swaps market is now pricing in a “terminal” fed funds rate of 5.10%.