Is it too soon to call this the Powell policy?
We have repeatedly highlighted what appeared to be an enormous change announced by Powell at the October 30 FOMC press conference when he said:
"We've just touched 2% core inflation to pick one measure, & then we've fallen back. So I think we would need to see a really significant move up in inflation that's persistent before we would even consider raising rates to address inflation concerns."
When you break that down it's an incredible shift. It's a policy of keeping rates at current levels for years.
However Powell is prone to slips of the tongue so one line of thinking was that he didn't really mean it. Then he doubled down today.
"I would want to see inflation that's persistent and significant" before raising rates again, Jay Powell said. "That's my personal view."
The personal emphasis is in contrast to the first statement where he mixed 'I' and 'we' but his repetition of the main points was no mistake. And at the end of the day, the Chair runs the Fed and his policy wins out so the message is that rates will be here or lower for a long time.
The market immediately bought gold and sold the dollar on the statement. It's turning into a significant dollar selloff with the commodity currencies leading the way.
2020 could be an interesting year for the dollar.
