Dollar dives sharply as Fed Chair Jerome Powell seems to be backing down from his monetary stance, facing political pressure from Trump.
The key take away is that Powell said “. Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy‑‑that is, neither speeding up nor slowing down growth.”
That is, in Powell’s view, federal funds rate at 2.00-2.25% is “just below” neutral.
However, it should be noted that in September projections, median longer run projected federal funds rate was 3.0%. Central tendency was at 2.8-3.0%. And the range was from 2.5-3.5%.
2.00-2.25% couldn’t be considered being “just below” 3.0%, nor 2.8-3.0%. So, is Powell finally revealing himself as a dove, not that balanced, composed Fed chair that he protraited? Or is he selling Fed’s independence?
Also, back on October 3, Powell said “We may go past neutral, but we’re a long way from neutral at this point, probably” (see this CNBC report). Powell in his own words on October 3. Just in case, start at 8:00.
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Did the economic outlook change that much since then? Or he lied back in October? Or he is lying now?
