Fed Chair Jerome Powell made it clear the Fed will not move on interest rates unless it sees a significant and persistent move in inflation.
Fed Chairman Jerome Powell said the Fed would like to see a move in inflation that is significant and persistent before it raises interest rates again.
"They want to be viewed as being in neutral. And in fact, he made it clear he thinks they're probably not really in neutral. They're still accomodative," said Ward McCarthy, chief financial economist at Jefferies. "The take away from that is the probability they're going to make any changes in policy for at least six months is very low, and it would take something quite significant for that to happen.
While markets are laser focused on the Dec. 15 deadline, Powell said the Fed can't respond to trade headlines. "We look at a range of factors. We try to look through the volatility in trade news," he said, adding Fed officials do not set monetary policy based on the trade developments. He said the market had been worried about the potential for a hard Brexit for the U.K., but it does not seem that will be the outcome after the U.K. election this Thursday. The other fear, of course, had been that trade wars would hamper global growth and create a worldwide recession.
"They'd like inflation to go higher. We had a multi-generational strong labor market. We have all-time record highs in equities and we don't have accelerating inflation. Of course they'd like inflation to be slightly higher. The economy is in pretty good shape," said Hill.
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