Powell's Nirvana smells like rate hike spirit

The US Federal Reserve fresh chairman Jerome Powell is an experienced central banker with a long professional career in public posts that make him an experienced speaker and skillful verbal equilibrist when it comes to public speeches. This turned increasingly true during his first Congressional hearing when Congressmen grill the central banker in public.

The key message from the new Federal Reserve Chairman Jerome Powell is that: “ further gradual increases in the federal funds rate will best promote the attainment of both of our objectives (meaning inflation and full employment).”

Although central bankers are renowned for their verbal equilibrium, that has them talking loud in many words without saying nothing, the overall tone of the prepared remarks as well as the Q&A part of the Congressional testimony was cautiously upbeat. 

Especially Powell’s the economic outlook turned overly optimistic.

Just look at the key quotes:

• “This pace of job growth was sufficient to push the unemployment rate down to 4.1 percent, about 3/4 percentage point lower than a year earlier and the lowest level since December 2000.”

• “Inflation-adjusted gross domestic product rose at an annual rate of about 3 percent in the second half of 2017, 1 percentage point faster than its pace in the first half of the year.”

• “We continue to view some of the shortfall in inflation last year as likely reflecting transitory influences that we do not expect will repeat; consistent with this view, the monthly readings were a little higher toward the end of the year than in earlier months.”

Basically said, the upbeat outlook for the economic growth that is likely to support wages in rising higher and that in turn will support aggregate demand, that will eventually see prices rising is confirmed with growth risk tilted to the upside.

That’s it folks! Rate increases are here to come, get ready for the spring to deliver another 25 basis points rate hike on March 21, as well as on June 13, September 26 and possibly December 19 this year.