What Powell Actually Said

“The historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done,” but it’s not done, Powell said: Core services inflation ex-housing has not come down.

By Wolf Richter for WOLF STREET.

At today’s meeting, the FOMC raised its five policy rates by 25 basis points, bringing the upper end of the range to 4.75%, as widely expected. The Fed has now hiked by 450 basis points in 10 months, far more than anyone imagined a year ago. It has also run $500 billion off its balance sheet in six months of QT.

“Ongoing rate increases” will be needed to get rates to be “sufficiently restrictive to return inflation to 2% over time, the statement said, and Powell reiterated the need for “increases” multiple times at the post-meeting press conference. Always plural: “increases,” meaning at least two more rate hikes, which would bring the top end to 5.25%, as projected at the December meeting. Updated projections will be released at the March meeting.

“Shifting to a slower pace [of rate hikes] will better allow the Committee to assess the economy’s progress toward our goals, as we determine the extent of future increases that we require to obtain a sufficiently restrictive stance,” the statement said.

No rate cuts “this year” if economy performs as expected. More than two rate hikes? “We could certainly do that.”

“If the economy performs broadly in line with [the Fed’s] expectations, it will not be appropriate to cut rates this year, to loosen policy this year,” Powell said.

“If we come to the need to move rates up beyond what we said in December, we would certainly do that,” Powell said. “At the same time, if the data comes in the other direction, we will make data-dependent decisions.”

“More work to do.”

“The historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done,” Powell said.

“We covered a lot of ground, and the full effects of our rapid tightening so far are yet to be felt. Even so, we have more work to do,” Powell said, a phrase Powell reiterated over and over again – meaning more rate hikes.

“Inflation is running hot,” Powell said, so more work to do. But “we are taking into account long and variable lags” for monetary policy to impact inflation. Hence the slower pace of rate hikes.

“Without price stability, we will not achieve a sustained period of labor market conditions that benefit all,” he said.

 “Very premature to declare victory.”

“It would be very premature to declare victory or think we really got this.”

“Our job is to deliver inflation back to target, and we will do that, but I think we will be cautious about declaring victory and sending signals that we think that the game is won.”

“We have a long way to go. It is the early stages of disinflation. It is most welcome to be able to say that, that we are now in disinflation, that is great, but we see that it has to spread through the economy and it will take time.”

“Restoring price stability will likely require maintaining a restrictive stance for some time.”

“Our forecast is that it will take some time and patience, and we will need to keep rates higher for longer.”

The “risk of doing too little”

“I continue to think that it is very difficult to manage the risk of doing too little, and finding out in six or 12 months that we actually were close but didn’t get the job done, and inflation springs back, and we have to go back in, and now you really do worry about expectations getting unanchored and that kind of thing. This is a very difficult risk to manage.

“Whereas, we have no incentive or desire to over-tighten, but if we feel we have gone too far, and inflation is coming down faster than we expect, we have tools that would work on that.

“So, I do think in this situation where we still have the highest inflation in 40 years, the job is not fully done.”

“Labor market remains extremely tight”

“Despite the slowdown in growth the labor market remains extremely tight.”

“Although the pace of job gains has slowed over the past year and nominal wage growth has shown some signs of easing, the labor market continues to be out of balance. Labor demand substantially exceeds the supply of available workers and the labor force participation rate has changed little from a year ago.”

“Reducing inflation is likely to require a period of below-trend growth and softening of labor market conditions.”

About financial conditions loosening since October:

Financial conditions – measures of the credit markets, such as credit spreads, and not stock prices – after tightening substantially last year, began to loosen again in mid-October and unwound some of the tightening that they had done earlier in the year. Financial conditions are tracked by various indices, such as the Chicago Fed’s National Financial Conditions Index (NFCI).

You can see the easing since mid-October that unwound part of the tightening earlier last year (chart via Chicago Fed, red lettering by Wolf Street):

The minutes of the December meeting mentioned this “unwarranted easing of financial conditions,” and pointed it out as a risk that would make it more difficult for the Fed to bring inflation down. Powell was asked a couple of times about that today.

“Financial conditions have tightened significantly over the last year,” he said.

“The financial conditions haven’t changed much from the December meeting [Dec 14] until now.”

“It is important that the markets do reflect the tightening that we are putting in place as we have discussed a couple of times here. There is a difference in perspective by some market measures on how fast inflation will come down. We will have to see.

“I mean I am not going to try to persuade people. I have a different forecast. Our forecast is that it will take some time and patience, and we will need to keep rates higher for longer.”

At another point he said: “I would say that our focus is not on short-term moves but on sustained changes to broader financial conditions, and it is our judgment that we are not yet at a sufficiently restrictive policy stance, which is why we say that we expect ongoing hikes will be appropriate.”

“Of course, many things affect financial conditions, not just our policy. We will take into account overall financial conditions along with many other factors as we set policy.”

“We think we covered a lot of ground, and financial conditions have certainly tightened. I would say we still think there is work to do there.”

Made fun of “market participants” that caused financial conditions to loosen.

“Market participants have a very different job. It is a fine job. It is a great job. In fact, I did that job for years, in one form or another. But we have to deliver that [2% inflation]. So, we are strongly resolved that we will complete this task, because we think it has benefits that will support economic activity, and benefit the public for many, many years.”

Inflation not coming down in “core services ex-housing.”

“We have a sector that represents 56% of the core PCE inflation index, where we don’t see disinflation yet. We don’t see it, it is not happening yet.

“Inflation in core services, ex-housing is still running at 4% on a 6 and 12-month basis, so there is nothing happening there. In the other two sectors [goods and housing], representing less than 50%, I think you now have a story that is credible, coming together, although you don’t yet see disinflation in housing services, but it is in the pipeline, right? So, for the third sector [core services excluding housing] we don’t see anything.”

“It would be very premature to declare victory or think we really got this. Our goal, of course, is to bring inflation down. How do we get that done? There are many factors driving inflation in that sector [core services ex-housing]. They should be coming into play to have the disinflationary process begin in that sector. But so far, we don’t see that. Until we do, we see ourselves as having a lot of work left to do.

To another question on this topic: “We expect to see that disinflation process will be seen, we hope soon, in the core services ex-housing sector I talked about. We don’t see it yet. It is seven or eight different kinds of services, not all of them the same. And we have a sense of what is going on in each of the different subsections. Probably the biggest part of it, probably 60% of that is … sensitive to slack in the economy. So, the labor market will probably be important.”

“We are just telling you we don’t see inflation moving down yet in that large sector [core services ex-housing]. I think we will, fairly soon, but we don’t see it yet.

“Until we do, we have to be honest with ourselves, seeing ourselves as having perhaps more persistent inflation in that sector, which will take longer to get down. We have to complete the job. That is what we are here for.

For your amusement: Reporters’ inane crybaby can’t-you-stop-the-rate-hikes-now questions.

What was hilarious at the press conference today was a slew of crybaby can’t-you-stop-the-rate-hikes questions. They were so funny that we’ll go through some of them here, and you’ll see that Powell should have answered them with: “Stupid question. Next!” Or “I already shot this down twice. Next!”

But as Fed chair, he has to answer them in some polite manner, and you could see his exasperation.

Question: “Why do you think further rate increases are needed? Why not stop here and see what transpires in the coming months before raising rates again?”

Powell should have said: I just explained it, you idiot. But he didn’t.

Question: “Did you or your colleagues discuss the conditions for a pause at this meeting this week?”

Exasperated, Powell said, “the minutes will come out in three weeks and give you a lot of detail.”

Question: ‘Was there discussion today of the possibility of pausing rate increases and then restarting them?”

Powell: “So, the Committee, obviously, did not see this as a time to pause. We judged the appropriate thing to do at this meeting was to raise the Federal funds rate by 25 basis points and we continue to anticipate that ongoing increases in the target range will be appropriate.”

Question: “Would it be possible to take a meeting off for example, and then resume? You know, could you, rather than doing that every meeting, go a little more slowly, take some gaps in between moves?”

Powell: “This is not something that the Committee is thinking about or exploring in any kind of detail.”

Question: “I wonder if you considered the idea of whether or not your understanding of the inflation dynamic may be wrong, and it is possible to achieve these things without raising rates that high….”

The Fed hiked its five policy rates by 25 basis points:

  • Federal funds rate target to a range between 4.50% and 4.75%.
  • Interest it pays the banks on reserves to 4.65%.
  • Interest it charges on overnight Repos to 4.75%.
  • Interest it pays on overnight Reverse Repos (RRPs) to 4.55%.
  • Primary credit rate it charges banks to 4.75%.

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  290 comments for “What Powell Actually Said

  1. drg1234 says:

    It’s so funny to read the business media, and then Wolf, interpret the exact same event. In diametrically opposed ways.

    • Seba says:

      Also the comments section in wolf’s articles, check out the one about job openings earlier today. Plenty of interpretation of Powells statements there, this article seems like a good response lol.

      • Leo says:

        All our politicians say that they are working for their voters, but majority of voters on both sides keep getting poorer and the 1% keep getting richer.

        It’s not what you say, but what you do. Karma trumps lip-service.

        J Pow is still unable to handle “transitory” inflation and blames market for loosening financial conditions when he controls monetary policy.

        • Bobber says:

          Not surprising. Legislators make the bulk of their money from tips, not the base salary.

        • Augustus Frost says:

          Financial conditions are a lot more than monetary policy. It’s psychological.

    • Andrew says:

      Wolf still has faith in our institutions and in the Fed. He trusts them when they say they’re serious about bringing inflation down. Just like many had to learn from covid – the government doesn’t care about you. The government needs inflation to keep the house of cards standing. The fed and the BLS play key roles in facilitating that inflation. It’s not an accident that the way CPI is calculated was just updated, again, to take effect beginning with the next CPI release. And make no mistake – the update methodology will result in a lower number. Anyways, doesn’t matter, this is why Bitcoin wins. It’ll be a hard pill for Wolf to swallow. But just like everyone else, he’ll eventually buy Bitcoin at the price he deserves.

      • Wolf Richter says:

        Your CPI comment is silly — as is the rest. The CPI weighs get constantly updated, based on where consumers spend their money. I have been tracking the weights just to shut down your kind of BS — and I have them on a spreadsheet. For example, the BLS increased the weights of rent because people spent more of their money on housing, but rents are spiking the most, which made CPI worse. You’re just a bitcoin troll, and bitcoin needs you because it collapsed by 65% LOL

        • Michael says:

          ^^^THIS^^^ is why I come here. Wolf, E.B. Tucker and Gregory Mannarino speak their mind. It’s refreshing.

          Thanks Wolf.

        • Mark says:

          FTX kept a spreadsheet too!
          Sorry I couldn’t help myself

      • DaveP says:

        Those who dont trust government issued fiat and instead sing the praises of Bitcoin and others because they are out of reach of the big bad Feds. That is until the coins go into the ether through malfeasance of all sorts. Now they are whining for government regulation and intervention in their racket.

      • RH says:

        Cryptocrap is not the future any more than tulips or cacao beans were. I have no faith in our institutions.

        Still, I am getting surprised at the continuing, tiny rate increases: they are sucking the capital right out of their buds’ the CCP cadres’ markets, and other markets, because they are in relatively risk free treasuries — provided our hyper-nutty Congress does not cause an insane US government default, which may actually be possible.

      • Brian says:


        Good grief, man! This is such BS. The Fed isn’t perfect but they’re not out to harm individuals. They’ve got a tough job and though it’s easy to look in the mirror and see how things they’ve done have caused problems, what you can’t see is the problems that would have arisen had they done something differently. They’ve got big problems, blunt controls, and high lag. That is not a recipe for a good control system but it’s the only one we have and I certainly won’t claim that I could do better. Crypto has its benefits and problems just like any other asset and will not be replacing fiat.

        I’ve posted positively before about crypto (Wolf knows this ;-) but always to provide facts and combat misinformation. What you’re spouting here is misinformation.

      • electroneuter says:

        “But just like everyone else, he’ll eventually buy Bitcoin at the price he deserves.”
        This is beyond funny, Bitcoin-lovers issuing a comics-style fatwa on Wolf and the rest of non-believers. Life in marvellous times, I guess.

    • Mak says:

      [i]”It’s so funny to read the business media, and then Wolf, interpret the exact same event. In diametrically opposed ways.”[/i]

      So very true.

      I didn’t have the time in the last 12hours to actually read any of the source material. In fact I only read the headlines and closed some positions because the headlines lead the herd and the herd lead the headlines.

      And at this stage today’s events will continue to be interpreted as a step towards moderation for the next few weeks or months until an inflation report or a fed rate rise slaps more sense into them.

      Personally, I’m positioning myself for a higher inflation and higher rates for longer environment.

      For some longer term context. Have a look at this link to see how exceptional the current period is:

      • ru82 says:

        IMHO. A fed fund rate of 4ish and mortgages at 6ish in still accommodative as they are historically on the low end still.

        I still don’t see why people freak out at 6% mortgage interest rates and act like they will go back down again into 5% or lower. The only way we ever get below 5% again is if the FED buys MBS again. Banks do not want to carry a 30 year mortgage less than 5%. Too much risk involved. That is why 98% of all loans since 2010 were basically bought or backed by the GSE.

        The current rate is lower than all but 7 or 8 of the last 50 years of Fed Fund rates going back to 1965.

        • Augustus Frost says:

          It’s mortgage brokers, realtors, and home builders “freaking out” the most.

          As for prospective homebuyers, those that aren’t trading up with substantial home equity are shut out or agree to become debt slaves, candidates for future default.

        • Nat says:

          “I still don’t see why people freak out at 6% mortgage interest rates…”

          Its more the rate of change and lack of preparation for this change than anything. If we stay here long enough people will stop worrying about 6%. Its just we shot up to 6% from 3% in about one year, when the trend for the last decade was to slowly trickle down from 6% to 3%. The absolute value (6%) isn’t bad, but the rate of change (2x base in one year relative to average of 1/10th that equivalent rate in the other direction for and average year of the prior decade) is understandably setting some hair and undergarments on fire. If it either stays at or above 6% for two more years, no one will fret about 6% or cry about the need to get back to 3% any more; 6% will seem fine once again.

          Think of it like: “we spent 2 seconds dropping 64 feet after climbing 64 feet over the previous 20 seconds. I don’t get what the issue is, we are back at the same altitude we were over a minute ago.” That is the exact timing, speed, and height parameters of driving up a 20% grade ramp that is 326 feet long, leisurely at just over 11 miles per hour up to about 64 feet of height over 20 seconds where the ramp ends and then dropping off the end of the ramp in free fall to hit the ground 64 feet below in 2 seconds … but you finished at the same altitude you started!

      • phillip jeffreys says:


        Am doing same.

    • Leo says:

      Business media sucks. It’s surprising that there is so much misinformation in the so called “information age”. Information is true power and “misinformation” is equivalent of slavery (a prison for your mind).

      The only way to fix this is to remove the monopoly of big tech companies and break the cloud. The people should have a rack of 5 cheap servers in their garage and make it part of a cooperative web that is not controlled by big tech for profit.

      • Craig says:

        “The only way to fix this is to remove the monopoly of big tech companies and break the cloud. The people should have a rack of 5 cheap servers in their garage and make it part of a cooperative web that is not controlled by big tech for profit.”

        Price out the cost per installation to have the equivalent functionality of a large-scale cloud server and I suspect that very few people would join this cooperative. (Consider power and network redundancy, loss of deep discounts by only buying a few servers and disks at a time, backup costs and hassles to the participants, etc.)

      • Ross says:

        “have a rack of 5 cheap servers in their garage” From 1994 until about 2005 I did this, because the cloud didn’t exist. No one is going to do this because it’s an expensive, time-sucking PITA. You could say that people should build their own houses and cars, and raise their own tomatoes and chickens, but no one is going to do that either.

        Oh and cooperatives suck too. Any organization not motivated by profit eventually becomes dominated by arrogant egotists that drive away any reasonable people. See any HOA.

      • phillip jeffreys says:

        Apple started in a garage!

    • NoBadCake says:

      For public facing official to assemble the words that say approximately what they mean but for the mass of listeners to hear differently what they want – is strange magic.

  2. Old Engineer says:

    That may be because Wolf’s post is almost exclusively quotations of what was said and not interpretation which is mostly what I see in the media.

    • Retired Debt Free says:

      100%, the Fed should have removed his glasses and screamd “Stop Spending!” I have never seen it this bad.

      • cas127 says:

        Things can get worse.

        Remember Tim Geithner’s eyes in March of 2009…he literally looked like he was going to be executed.

        This is a sad, badly declining nation with a ntl debt-to-GDP of at *least* 100% (probably closer to 150% after all “implicit guarantees” honestly factored in…remember how much hidden dirty laundry came out for tiny Greece…).

        And our “leadership class” (which has guided the past 55 yrs of decline) is likely the *worst* it has ever been (who are the genius statesmen/business people capable of reversing this decline?).

        They *never* had the “fixes” they perpetually claimed for half a century…

        • Lauren says:

          I think a bigger issue than debt-to-GDP is young people in mass realizing they just aren’t going to have much in life. Very dangerous situation when lots of people have little to nothing to lose.

        • cas127 says:

          I agree.

          But I’m not sure from which the direction the dubious/dangerous “Man (Woman?) on the White Horse” in the US is coming from, the Left or the Right.

          And it is just depressing/worrying that Putin is okay with throwing another 250k to 500k Russians against Ukraine.

          At this point, I think it would take a Chinese move in the east to shock some sense of rationality/proportion into Putin (and China lacks near term motivation).

          The US is too debilitated to do a *lot* more for Ukraine and Russian numbers may tell in Ukraine.

        • El Katz says:


          I must interact with a completely different group of young people than you. While not all have every *thing* they want, few (more like none) of those that I know express the hopelessness that you espouse. The ones that I know are planning for their futures and taking steps to continue to achieve their ever-evolving personal goals. And, yes, that includes home ownership – many of which have moved from their starter home to the next leg up – and career growth. Age group? 30’s and early 40’s.

          I’m more fearful of the FSA (*free sh!t army) that thinks their future is free government cheese and winning the lottery (which in some circles, playing the lottery is considered the “stupid tax”).

        • Kurtismayfield says:

          El Katz,
          Thank you for so clearly describing survivorship bias.

        • rojogrande says:

          El Katz,

          Two days ago you said: “Too many people with champagne tastes and a beer budget bemoaning the “affordability gap” because they can’t have a HGTV dream home.”

          If all the people you know in their 30s and early 40s are doing so well with their ever-evolving personal goals, including home ownership, who were you talking about when you made this comment?

        • cas127 says:

          The more macro stats you know, the more worried you are.

          Besides ntl-debt-to-GDP, there are 50 years worth of trade deficits and the unfunded liabilities of SS and every public sector pension (which I only hope will add *just* 50% to the debt-to-GDP number).

          If anybody can make me feel better about those 3 items, I’ll welcome them.

        • Lauren says:

          El Katz:

          ‘The ones that I know are planning for their futures and taking steps to continue to achieve their ever-evolving personal goals. And, yes, that includes home ownership – many of which have moved from their starter home to the next leg up – and career growth. Age group? 30’s and early 40’s.’

          Good. I don’t argue with success.

          However, as Wolf says, no one escapes inflation. The decimation of the purchasing power of the dollar is an emergency, no two ways about it. What would you say to someone pulling in say $12 an hour (besides get a better paying job)?

        • ru82 says:

          @Lauren – Don’t worry. We still have millions of illegal immigrants crossing the border to live in the US and help pay off the debt? I am not sure many other countries have the same problem. The U.S. is still one of the best places to live.

        • rojogrande says:


          I hope this helps on two of those issues. Past trade deficits are just that, in the past. The surplus countries got their dollars, treasuries, or whatever. They’ve been paid with fiat dollars. SS is essentially pay as you go, with current workers largely covering current beneficiaries. Benefits may need to be cut as the worker to retiree ratio worsens, or taxes increased, but as long as there are workers something will be there.

          Public pensions are another issue because some states and municipalities are well funded, while many are not. Municipal bankruptcy and state level default (it happened during the Great Depression) may come into play for the most underfunded, but I think this is the thorniest issue of the three.

        • cas127 says:


          I appreciate the effort but…

          1) When real trade deficits persist for essentially 50 years straight, it is very hard to avoid the dangerous conclusion that the US has simply rendered itself (very) uncompetitive in the production of real goods. The problem hasn’t self-corrected, it has gotten worse.

          And real goods production is the bottom line in international trade.

          No other country in the world gets away with endlessly issuing empty paper promise IOUs (greenbacks, US Treasuries) that are used to buy *real goods* that cost exporting countries real, costly resources.

          What does holding a USD get you? A “claim” to buy crappy goods/rotting property in a rapidly declining US mainland.

          What does holding US Treasuries get you? For 20 years – ZIRP.

          Who will ship endlessly to such a “buyer” paying on (worsening) credit?

          2) SS – sure the enormous deficits could be fixed *in theory* – but then why haven’t they for 50 years? Because DC is absolutely terrified of blowback – which only worsens with delay. The DC entitlements crisis is huge and intractable – if it weren’t, it would have been addressed decades ago.

          The G covers over 50% of the medical industry’s astronomical share of US GDP – it could have strangled medical inflation a long, long time ago. But well placed political power/myths/lies have castrated almost every “fix”.

          Ditto student loans/higher education cartel.

          Again, I appreciate the effort, but after decades of vague DC hand waving about “we have it under control” I need specific action plans with hard costs.

        • Wolf Richter says:

          “2) SS – sure the enormous deficits could be fixed *in theory* – but then why haven’t they for 50 years? ”

          That’s BS. I don’t know why this BS keeps getting spread. SS accumulated $2.8 trillion in surpluses over the past 30 years, and that surplus has just now flattened out:


        • rojogrande says:


          You keep adding new issues and want “specific action plans with hard costs.” Books have been written on these topics, and the comment section here is not the place to resolve them. Even if such an action plan existed for one of the issues you raise, is it politically possible? I get the sense you’re younger, because I used to think like that. I’ve reached an age where I accept the general mode of operation is muddling along until a crisis of some kind maybe forces more substantial change.

          I agree the US trade deficits are too high, but do not discount the enormous productive capacity of the US. Living standards may decline a bit if other countries no longer accept dollars for real goods, but I think the US can adjust to that by increasing its own productive capacity. SS was tweaked in the 1980s and can be tweaked again if necessary. Things are never as good or as bad as they seem. That said, I know you’ll think this will be a wholly inadequate reply.

    • andy says:

      Wolfstreet is one of a kind. And we are lucky to have it. The “media” on the other hand will twist everything into a pretzel, even direct quotes. There are no journalists left in media. Maybe few, and far between.

      • Fed up says:

        Pure desperation on the part of markets, as always. Nothing dovish in his speech like other media is suggesting.

    • John Townley says:

      The new taking point of the financial media is ” Disinflation” at least until the minutes come out.

      • Hardigatti says:

        Yes, what the heck is “disinflation”. Certainly not deflation.

        Seems like they are talking about a negative second derivative of price. I.e., price increases have slowed down.

        • cas127 says:

          DC will try to memory hole the insane inflation of 2021 as fast as it can. The inflation will still be baked in, but year-over-year changes will be the only item they ever talk about.

        • info says:

          I want deflation actually.

        • qt says:

          Inflation but at a slower rate? Disinflation sounds better like deflation but prices are not going down just yet. Nobody like deflation as it is associated with the Great Depression.

        • Flea says:

          A slowing of price increases = disinflation

        • thegrandwazoo says:

          Disinflation is a deceleration in the rate of inflation. 9.2% to 6.5% is disinflation. We still have high inflation.

          Deflation would be negative inflation. We’re a long way from that!

    • This one question got off to a good start:

      “I wonder if you considered the idea of whether or not your understanding of the inflation dynamic may be wrong….”

      Disregard the rest. The Fed is the primary cause of inflation. They really ought to consider that much more seriously!

      • Wolf, I don’t get a secure feeling knowing that the Social Security trust fund consists primarily of U.S.government bonds held to maturity. At that time, the U.S.government will pay the fund out of current revenues. Isn’t that the problem? That is, the good faith and credit of the U.S.government is erected on top of a Ponzi scheme?

        • Wolf Richter says:

          Treasury securities are my most secure investment. That’s where the money goes that I really don’t want to lose.

          There is no problem, other than the outgo being slightly higher than the income. This fearmongering is just plain BS. I normally delete this “Ponzi scheme” braindead BS

          REEAD THIS:

        • I can avoid the trigger words. Another way to say it is that potentially, the real value of U.S. government bonds could fall considerably below face value, more than a little bit. To be sure, gold did that from 2011-2015, though it was temporary. My worry about bonds is that their value will be destroyed permanently, caused by unending deficits and recurring Fed irresponsibility.

        • Wolf Richter says:

          Laurence Hunt,

          As bonds approach the maturity date, their price approaches face value because everyone knows that on the maturity date, the holder will get paid face value. So if you hold Treasury securities to maturity, you will always get face value. And if you buy them at issuance, like the SS fund does, you can NEVER have a capital loss, and you always collect your interest.

          I love bonds for that reason — including corporates. But the era of interest rate repression screwed up bond investing. It’s now returning to its proper form.

          I think you mean the loss of purchasing power due to inflation.

          The big risk for bonds, and for ALL assets, is inflation: the loss of purchasing power. So you need to figure out how to get compensated for inflation by either yield (bonds) or by hoped-for price increases and yields if any (stocks, RE), etc. This is very hard to do when inflation is 8%, and stock prices and RE prices are dropping, whose losses are on top of the losses of purchasing power due to inflation.

        • (I did read that article when you published it. It’s the best summary I’ve seen of how social security works.)

        • You are understanding me correctly, Wolf, including in blaming the Fed. It’s my view that they have overinflated stocks, bonds, real estate and collectibles, as well as undermined capital investment. If I understand secular cycles, then after the next recession makes our economy more local, capital will start to flow into commodities and manufacturing again. I don’t think the Fed can win the inflation battle, because of deflating assets, it’s a no-win game.

  3. Tony from Aus says:

    When will fear to any discernable degree enter the markets? I have never seen anything like this but to give the pivot cult some credit, why would they believe Powell? It wasn’t long ago he “wasn’t thinking about thinking about” taking away the punchbowl and that he had infinite QE “ammunition” or whatever. They refuse to see him as anything other than the guy in the bar buying everyones drinks (using drink cards) and a nearby penthouse for the afterparty.

    • Tom S. says:

      That’s the real crux, does the fed reserve control wall street or does wall street control the fed? People put up with some pretty bad inflation in the 70s and 80s. The fed will watch elevated inflation for a lot longer than it will watch a big bank teeter on bankruptcy. At least Powell is acknowledging that there are higher rates ahead. No discussion of the balance sheet, though.

      No handle on labor and no handle on inflation, it’s not really a rip roaring success is it? Or are things actually going along quite swimmingly? Depends how you’ve placed your bets.

      • John Townley says:

        “That’s the real crux, does the fed reserve control wall street or does wall street control the fed?” The same question applies to political talking points. “That’s the real crux, does the Media control Washington or does Washington control the Media?

        • Tom S. says:

          It’s the latter for both.

        • cas127 says:

          DC really does run things (badly) but there are deeply vested interests that essentially use the politicians as front-men/cut-outs to fade the heat for policies that end up hurting 327 million people to semi-shelter maybe 3 million.

          Admittedly the long term difference between DC lobotomy/perma-state conspiracy can difficult to discern.

  4. All Good Here Mate says:

    Question… what does Powell mean by ‘ex-housing’? Am not familiar with this term.

    • American Dream says:

      Just excluding housing I believe so other service categories that aren’t housing costs… Has to say this because everyone thinks housing and rent is a lagging indicator 🤦

    • Wolf Richter says:

      Housing (rent factors) is part of services. So services inflation excluding housing (ex-housing) means a price index of all services except rent factors.

      The distinction is important because rents in the price indices are surging now, but are expected to back off in a few months (I’m not persuaded they will, but that’s the expectation). So if you take rents out of the services price index, you get the other services alone — healthcare, insurance, repairs, financial services, haircuts, food services, delivery, transportation, etc. — and that portion of services is showing very persistent inflation, and that portion makes up 56% of the Fed’s preferred core PCE price index.

  5. American Dream says:

    Love the questions today 😂 especially that last one questioning if the Fed understands inflation dynamics.

    Going into the meeting today the thing markets were allegedly focused on was if they would continue to allude to plural hikes.

    They did! Plural hikes! So that’s 2 25pt hikes to go and with the may one being only 30% priced in.

    I understand why people are frustrated with the market exuberance but clearly it was another case where it didn’t really matter what Powell said it was gonna rip.

    The Fed taking a data dependent approach also makes a ton of sense. They’ve already hiked 450 pts. Nobody would believe you 12 months ago or even 9 months ago that we’d be this high.

    Markets will figure it out eventually.

    P.S. 11 million job openings per jolts today.
    ADP report was soft but it seems like that was due to weather during the reference week they used??? Maybe wolf can shed some light on that and if NFP will have that issue also🤷

    • Yancey Ward says:

      And that right there is the problem- Powell was saying, not doing this week.

      If he were really serious about this exuberance, it would have been another 75bp raise, not a retreat to 25bp. He almost had me convinced near the end of last year, but after yesterday- fuck it. He will have to walk the walk next time- I am done reading what he says. I am guessing we take out the highs in the market sometime before Summer. Right now oil is meandering under $80/bbl- if China really does open up the spigots, it will go back over $100/bbl by June, and all the disinflation Powell was bragging about yesterday will disappear. There isn’t a 2nd SPR for Biden to drain.

  6. paiute says:

    They will have no choice but to keep going until it’s clear the increases have worked a little more than needed. Only then would it make sense to back off. And probably not by much.

  7. Jon says:

    Even if the inflation have gone to zero it only means no price increases but the life essentials are already out of reach of 10s of millions of people
    In other words rich people would come out winner and poor middle class would get screwed

    • enough says:

      RICH keep GAINS on POOR.

      i.e. soft landing

    • Nissanfan says:

      Maybe. When products won’t fly off shelves, prices will go down. When contractors will ask for work, instead of now where you actually have to ask them to show up to a job, price for those services will also go down.

  8. Jay Worley says:

    Did anyone ask him about falling 30YFRM?

    Down to 6.04% today and likely to break through 6% next week.

    Pulte Homes just came out and said they’re seeing housing starting to stabilize, and they intend to increase the number of houses they plan to build this year.

    This entire morass is about housing. Wolf’s article yesterday paints a glass half full picture, primarily looking at those 8 or so top housing bubbles and how they’re taking very modest hits given how much home prices in those cities exploded over the last 5 years.

    Looking at NY metro graph makes me ROTFLMAO. Down 1.6% since July but still up over 8% YoY. That’s hilarious.

    Assuming Pulte is even 1/2 right, housing is well on its way towards seeing a bottoming trough in the next three months, given the labor market.

    So at the end of the 12 month “carnage” that started last March when the Fed FINALLY decided QT was in order, we’re still going to be left with an enormously overpriced housing market.

    I for one hope to see inflation bottom in the next few months & start to creep up again. Something has to force JPowell to put on his big boy Volcker pants and get ready for what lies ahead in late 2023 or early 2024: A 7% FFR or higher to get a grip on inflation. Side note: Someone send JP a DM emphasizing the point that 2% core PCE inflation outside of a major recession is pipe dream / dead.

    If there’s a Fed pivot coming, it’s admitting as much. Inflation is here to stay.

    • Wolf Richter says:

      When Pulte and others talk about housing is “stabilizing,” they mean volume isn’t plunging further. Prices drop low enough, and volume will pick up, that’s what we hopefully will see. Right now the market is frozen.

      But mortgage applications for purchase mortgages just re-plunged (weekly data out today), so Pulte may have been premature.

      But volume needs to pick up, and the way it does is by prices dropping far enough. And each time prices drop, there are more home sales.

      Same during Housing Bust 1.

      • Rick Vincent says:

        I think that the way housing volume picks up is lower mortgage rates. I get the sense too many potential sellers are holding ~3% mortgages and don’t want to list their house to move into a 6% mortgage. But it sounds like your saying, Wolf, that eventually sellers will adjust their prices lower given buyers are on the sidelines due to high prices. Hope something changes because right now we seem to be in a jam; even Sherwin Williams announced concerns about housing in their earnings call last week; and the stock tanked.

        • Josh T says:

          I have an application to rent a house in the Seattle area for $3,700 a month that was pulled off the market for $965k in the fall. The mortgage would have been $6,000 with 20% down. Why would I pay an extra $2,300 a month and tie up close to $200k. This is why prices are going to continue to fall.

        • Depth Charge says:

          @ Josh T – Do you have a wife and kids where you need to spend that much on a rental house? If you can swing $6k per month on a mortgage (seems you were considering buying), why not get a much cheaper rental and bank everything and just buy a house for cash in a few years?

        • Josh T says:

          @DepthCharge. I am in the market to buy and was watching that house before they took it off the market. I see the house as a place to live first and foremost. When it makes more sense to buy instead of rent, I will buy. Even if I had the money to pay cash today, why buy when I can rent for cheaper? $965k in t-bills would pay enough interest to cover the rent. I can live there and still have the cash. It is for this reason that I think prices still have more to come down.

        • Depth Charge says:

          “I can live there and still have the cash.”

          I see. It’s not about actually buying and paying off the house at all. You don’t want any skin in the game, and you’re into the new school thinking that you never pay something off, you just do the Harryhowmuchamonth thing. Until this train of thought is expunged, the distortions will continue.

        • Josh T says:

          @DepthCharge. You made a lot of assumptions in your last statement that you know nothing about. I think you missed the point of my original post which was that real estate prices make no sense. No point in catching a falling knife. I think your desire for home ownership at all cost has helped perpetuate these current prices. Just because some one can afford to do something doesn’t mean they should. I am sorry, if I forgot to check my brain at the door.

        • DawnsEarlyLight says:

          Josh and DC, thank you for providing various viewpoints on rental/ownership. It was informative and enlightening. May you each take it as such, and have a great February!

        • Depth Charge says:

          “I think your desire for home ownership at all cost has helped perpetuate these current prices. Just because some one can afford to do something doesn’t mean they should. I am sorry, if I forgot to check my brain at the door.”

          Textbook projection. You posted “I am in the market to buy and was watching that house before they took it off the market.” I myself am not even in the market to buy a house. You are an idiot, I know that much. Bye now.

        • rojogrande says:

          Josh T,

          You may as well let that nonsense go. Good luck with your rental or home purchase.

        • Randy says:

          Reply to Josh –

          Other side of the state… not that it is cheap here (!) but my apartment complex 1BR is $825. Admittedly no frills but not a bad part of town. Low end of the market in Spokane Valley. $3700 a month would destroy my savings much too quickly.

        • Josh T says:

          @Randy. I actually grew up in Spokane and my parents still live there. Go Cougs!

      • John Townley says:

        We may see a seasonal spring bump that will have everyone screaming “The Bottom Is In” In my experience Buyers have started entering the spring buying season earlier and earlier each year for the last 10 years so it will look like a robust start only to fall off earlier and then we will be back to price cuts around May-June

      • Jay Worley says:

        Right. If volume doesn’t plunge further, then that means a bottom / trough is forming. I’m pretty sure that’s what I just said.

        Anytime you near or reach a bottom, then prices generally stop falling. I suspect that to occur by late spring / early summer.

        And at no point did I say we’re going to see significant rise in prices. There continues to be this tug of war between buyers & sellers with neither having a clear upper hand.

        The last I checked that’s called a normal market with 3-5% annual price gains. But even then if that comes to pass, then we’re still left with insanely high home prices.

        At some point in the next 18-24 months, there’s going to be a significant recession. The main question then becomes does Uncle Sam let rent & mortgage relief return or do then let the market via foreclosures manage the fall.

        With so many Fed owned houses, one has to wonder, right?

        • Wolf Richter says:

          What I said was this: “But volume needs to pick up, and the way it does is by prices dropping far enough. And each time prices drop, there are more home sales.”

          During the housing bust, there were big increases in sales volume, even as prices collapsed. From the NAR: volume spiked in the worst years of the housing bust into 2012. And below the price chart by NAR

        • SocalJohn says:

          Good lord. No recession in sight. No stabilization of house prices in sight. Not even close.

  9. Phoenix_Ikki says:

    Thank you for breaking it down since I didn’t watch the live press coverage.

    Hawkish alright but the market and many commenters on here must see PowPow with a permanent Sike sign attached to his forehead, otherwise I can’t see how anyone would interpret this as dovish or pivot in nature…

    Then again, this is a living example of once trust is broken it can be loss forever or take a lifetime to regain. I mean after 20+ years if not more of FED being the ultimate market enabler and always coming to the rescue, I can see why a lot of people can’t process FED can be go the opposite way despite actual action as proof.

    • HowNow says:

      There’s a persistence of belief in the reliability of most institutions, the Federal Reserve just being one. “Faith springs eternal”. They’ve been wrong so often but look at the effects: markets around the world are hanging on every word Powell spoke. Look back a year or too and nearly everyone knew that inflation was on its way. Everyone ex-Federal Reserve.
      I’m reminded of the commentary of stock market “analysts” who almost never issue a “sell” recommendation, and we know we know why. Just 14 years ago, the highly respected credit instutions, like Fitch, Standard & Poors, et al, we’re grading tranches of mortgages at AAA before the ground opened up and the housing market fell in. They got a tiny fine for their deceit. Yet, these “institutions” have not lost credibility in spite of being so wrong.

      • 91B20 1stCav (AUS) says:

        How – another excellent example of our national ADD (or: “…I just take a pill for that, now…”).

        may we all find a better day.

  10. Cassandro says:

    My key view is that the Fed is looking back in time for data (one to three months at least), while rate increases and QT impacts have a deferred impact. It’s like taking exlax in the evening after looking back at the missed morning business, but not being aware that the medicine may cause midnight or next morning drama that hasn’t been considered. JMO

    • Phoenix_Ikki says:

      That’s nothing I like to see more than for this insane delusion stock and housing market to have some explosive bloody diaherrea metaphorically speaking maybe…

  11. Old school says:

    Heard a couple of interesting things today.

    US bond market most inverted ever.
    World bond index inverted for first time ever.

    At least we are seeing a lot of history in our lifetimes like negative interest rates and thousands of crypto coins. Kind of like living in tulip bubble or Mississippi stock bubble.

    • Depth Charge says:

      Can you imagine actually believing in crypto, especially now? It’s blind greed.

      • HowNow says:

        Can you believe that flagellating yourself will protect you from the Black Plague or that Snow White got it on with 7 dwarves? Wait a minute… I need more coffee.

  12. Slick Willy says:

    Maybe it missed it but there was not much mention around the specifics of QT. Wasn’t there a thought that they may have to start selling MBS outright because of declining home sales?

    Why isn’t the financial press more inquisitive about QT – is it that they just don’t really understand it?

    • Wolf Richter says:

      The statement, the “Implementation Notes,” and Powell all said the same thing: QT will continue at the same pace. It’s on autopilot.

      I said about the same thing in my article. There isn’t much to talk about.

      However, if something changes, it will likely be a shift to selling MBS outright. If this is being planned, we’ll see it crop up in the meeting minutes somewhere along the line. If that happens, it will be a big topic.

      Tomorrow is my day to discuss QT based on the balance sheet that will come out; it will be my monthly update.

    • Pea Sea says:

      Nobody from the press bothered to ask about MBS sales; with a few exceptions they were all asking slight variations on “Wen pivot?”

      But it may be significant that Powell didn’t mention them spontaneously, either.

  13. Sporkfed says:

    The longer Powell takes to engineer his soft landing, the poorer we all become. I get it,
    using time to paper over the years of failures is standard Fed policy.

  14. Wolf Richter says:

    Take your earplugs out and listen to what he actually said and not what you imagine he said.

    This BS — “Powell is spineless” — has been going on ever since he first started talking about rate hikes back in the fall of 2021, and meanwhile he hiked by 450 basis points in 10 months, with more rate hikes coming, and he shed $500 billion in assets in six months, and will keep shedding at that rate. What’s your problem?

    • Gattopardo says:

      “Take your earplugs out and listen to what he actually said”

      You’ve helped me finally figure everything out. Not only do a whole lot of market participants (I don’t dare call them “investors” in this mania) have in earbuds, listening to who knows what music, they also SUCK ts lip reading!!!

    • Rick Vincent says:

      Maybe some of these people just hear the gentle voice behind the ear plugs? Personally I think the markets are delusional; they’re the ones who need to listen more closely.

    • DM says:

      Wolf, the issue is that market participants are not on board him. The 10 year dropped 13 basis points and mortgages may have a 5 handle soon. He hasn’t even hinted at selling MBS to control a possible resurgence in the housing market. He may have done a lot but he needs to do a lot more. He missed the opportunity to go 50 today and show the markets he means business.

      • ChrisFromGA says:

        I do not understand either why Powell doesn’t just drop a surprise 50bps between meetings. It would show that he means business.

      • Spencer says:

        If you drain the O/N RRPs, you inject cash and reserves back into the commercial banking system. That’s going to keep the award rate high, and longer-term rates lower. That implies a permanent interest rate inversion accompanied by stagflation.

    • Gary says:

      Sir: I very much respect and Thank you for your analysis. One issue in this Quantitative Tightening (QT) that is disturbing is the mortgage securities; these only look like they roll off when mortgage is payed off, but not an outright sale of the securities. As housing is an important part of GDP is the Federal Reserve actually maintaining a back door stimulus program as money that would be tied up in securities is free to loan more, such as the 40 year $3 million mortgage loan advertisement now appearing. Bottom line is Powell honest or are there more “stimulus tools?”

    • Boom says:

      I think what commenter “enough” means is Powell should have hiked that rate 1% for 4 months showing seriousness until enough chaos ensued forcing immediate fiscal change. It would be an overnight panic LOL.

      By the 2nd 1% rate hike, early birds would have taken notice and immediately changed habits. By the 3rd or 4th, limited panic would have started causing enough companies and people to change their habits and question the choices made.

      I get the reasoning – it’s slow burn. But none of this teaches a lesson.

  15. Finster says:

    This still seemed a disappointing performance from Powell. He started off on the wrong foot with his answer to the first question about easing financial conditions. Having correctly put FC in the crosshairs for most of last year, he actually dismissed them by shifting focus to “sustained” FC and then characterizing them as having tightened. This dissembling, as it was reinforced, naturally sparked an orgy of even further easing financial conditions.

    The dollar plunged against foreign currencies, against stocks, bonds, and commodities. That is, prices soared. Being traded in real time, tick-by-tick auction markets, inflation registers here instantly. Unless soon reversed, the effects of dollar depreciation will pass through the pipeline and be reflected in the coming months as a stalling in the consumer price disinflation trend.

    Markets have misread Powell before. If there is still confusion about the Fed’s stance, the Fed is to blame. It worried in December that weaker action might trigger an “unwarranted” easing in financial conditions, and tried to offset it with tougher talk. It gambled and lost. Today it doubled down on its folly.

    Tough talk does not commit the Fed to any policy action three or four meetings hence and the markets know it. But to couple weak action with weak talk? How many short term FC easings must happen before it’s a “sustained” easing?

    • SocalJohn says:

      It seems like he is different during q&a than during the prepared remarks. I’ve noticed this on multiple occasions.

    • Pea Sea says:

      That was a truly bizarre moment–he flat out denied that conditions have eased lately and then quickly changed the subject to long term conditions–and it didn’t help that this was at the beginning of the Q&A. I’ve said this before, but the man is not very good at speaking off the cuff. He dithers and equivocates at the best of times, and today he just plain lied.

      If the Fed is really concerned about its actions sparking unwarranted easing, someone in that building needs to sit down with Powell and explain to him how his word choices and his inability to frame things properly keep sparking that very easing, over and over.

      • Finster says:

        You bet. An obvious alternative is to rely less on talk and more on action. If the Fed thinks more tightening is warranted, what the heck is it waiting for?

        Even assuming it’s got its rate target right, it has the option of stepping up QT. It’s still sporting a pretty hefty balance sheet. Does it really need that big load of mortgages? Is playing favorites with sectors really monetary policy?

        It could easily have done its baby step hike without slamming the dollar and provoking an “unwarranted” easing of financial conditions, just by tweaking QT a bit.

        Or is mollycoddling Wall Street more important than quelling inflation?

      • HowNow says:

        It’s like Wally Cox being cast as “The Terminator”.

    • Today in the Wall Street Pivot says:

      I agree with you. As does the Wall Street Journal, which had an “I dare you, Powell” headline this morning:

      “Stock, Bond and Crypto Investors Call Fed’s Bluff on Interest Rates”

      I hope Wolf is correct, but there are many institutional forces working against him. And what happens as the 2024 campaign gets closer? More pressure to ease up.

      • Finster says:

        I’m rooting for Wolf too. I’ve seen the same thing he has before … a hawkish Powell interpreted and spun as dovish by the markets and media. Having said that, this latest Powell struck me as a changeling left by the pod people, a pale imitation of last year’s Powell.

        The about face on financial conditions is what spooked me. Maybe markets too. Powell effectively triggered a Fed put with markets already high and rising. We can still hope it was an aberration … as always, we will see…

  16. John says:

    I just really want to thank Wolf for all the great analyses! One simply cannot rely on most of the financial media as they largely report things inaccurately, either out of ignorance or intentionally (for some interested party’s benefit).

    When reading Wolf’s analyses compared to most of the media’s, it’s like two different worlds: It seems like the overall market is living in lala land, particularly based on its general reaction over the last month!

    As Wolf has said, the Fed cannot yet pivot this time because of “raging inflation.” The market seems to forgot this (or conveniently ignore this). Previous Fed easing was done when inflation was reportedly low: certainly not the case now.

  17. Jackson Y says:

    Today’s press conference was extremely dovish. Wolf, you’ve got to read between the lines.

    1) When Powell said “financial conditions have already tightened a lot & they’re not concerned about short term market movements,” that caused the first explosion higher.

    Not only was the second part completely unnecessary, the first part is false. The Chicago National Financial Conditions Index is lower than it was 10 months ago when they first started raising rates.

    2) When Powell said the market pricing in a lower FFR peak & year-end rate cuts was due to differing economic outlooks. Rather than shutting the door on rate cuts for the time being, when December’s NFP report just posted the lowest unemployment rate in 50 years, he implied they could happen. Naturally, the market responded by pushing up rate cut odds even higher.

    He could have laid out explicit conditions (similar to what they did for liftoff), eg cuts are off the table without both (1) PCE inflation at 2% & (2) unemployment rate of at least x%. No such thing.

    3) When Powell said there was no way they could pause, then raise rates again. One hypothetical scenario would be if inflation rebounded again during the “strategic pause.” Doesn’t have to be the base case scenario, just a scenario where it can happen. Instead he just said “nah, that’s not something we’re considering.” WTF?

    Powell knew exactly what he was doing when he said the things he did. I believe Wall Street interpreted his statements correctly, hence the rally.

    • SocalJohn says:

      I missed #3. If that happened it is indeed a red flag. Like you said, WTF?

      • The Falcon says:

        Powell said

        “I continue to think that it is very difficult to manage the risk of doing too little, and finding out in six or 12 months that we actually were close but didn’t get the job done, and inflation springs back, and we have to go back in, and now you really do worry about expectations getting unanchored and that kind of thing. This is a very difficult risk to manage.

        “Whereas, we have no incentive or desire to over-tighten, but if we feel we have gone too far, and inflation is coming down faster than we expect, we have tools that would work on that.

        The concern is a premature so-called “strategic pause” before “the job is done”. This is an indication that to err on the side of overtightening is the path, not to pause too early and then resume tightening. This philosophy is in no way dovish, it is a signal of the intestinal fortitude to keep turning the wrench right without pause.

    • Wolf Richter says:

      Jackson Y

      For 10 months, there are morons out there who said at every press conference that he was “extremely dovish,” and they twisted and torqued his words into being “extremely dovish,” and by now the Fed has hiked by 450 basis points in 10 months and shed $500 billion in assets in 6 months, and it’s continuing to hike rates, and QT continues on autopilot. You people are just hilarious.

      If the FF rate were still at 0% to 0.25%, I would give you a nod. But it’s 4.5% to 4.75%, higher than anyone imagined a year ago. It’s going to be over 5% by spring. By summer, he will have shed $1 trillion in assets. This “extremely dovish” BS has been a limp joke for 10 months.

      • Fed up says:

        Nick the pig is the worst offender.

      • cas127 says:


        I think that until people see another 20%+ stock index hit (and/or median home prices falling 30%+) they aren’t going to really believe that rate hikes are meaningful/serious.

        (And once those hits happen, they will lament the accomplished facts)

        After 20 years of ZIRP, they judge from effects rather than intentions.

        The price of creating a fairyland to (temporarily) live in is that everyone ends up going insane…either from belief (this is *wonderful and can never end*) or disbelief (the hopelessness of unrepayable debts).

        • cas127 says:

          As to the SP 500 defying interest rate gravity, it is helpful to examine the PEs of the highest weighted members.

          With the PEs of the Apples/Microsofts/Googles in the 20 to 28 range they don’t seem insane (relative to ZIRP era stds) but at traditional interest rates, they should be closer to 14-15.

          So SP 500 overweighting at the top (5-10/500 members maybe 20%+ of the Index) meshes with a semi “flight to quality” to keep this gut-shot duck flying.

          (Long term Treasury rates are likely key here…until 5%-7% 10yrs can be had (at what cost to real economy?) too many punters will hang on Apple/Microsoft/Google/some undefined miracle new tech).

          And housing? Well, when will inventories return to 2019 levels?

      • Hillel says:

        I think the younger generations expect instant results.

      • nyet says:

        And guess what?

        Mr. Market doesn’t care one bit.

        Neither does it care what you say or think.

    • Fed up says:

      Wallstreet is full of it. He was not dovish by any stretch of the imagination. Wallstreet deals in wishful thinking. They need more bagholders.

    • nick kelly says:

      There is a feed- back loop between market froth and Fed determination. The Fed has all but hired sky- writers to announce it is trying to induce a recession. If the market uses ANOTHER bump in rates to rally it is just telling the Fed to tighten some more.

      The most telling remark from Powell is not in these remarks: ‘House prices must come down so Americans can afford houses’
      How do we parse that?

      All this ZH type crap about Powell helping out his friends…..
      Powell is approaching retirement and knows he was labeled a pussy after Mr. T laid into him for doing some baby steps in 2018. His main concern now, apart from doing the obvious, crushing inflation, is his legacy.

  18. SocalJimObjects says:

    The thing is he hiked 25 bps, per market expectation. He should have hiked 50 bps just to show that he does not answer to markets. It’s really that simple.

    But yeah, did I say that the sun will never set on SocalJim’s RE empire?

  19. cynic100 says:

    Keep in mind that intelligent reporters are thrown out of the meetings. Yellin specialty.

  20. John Apostolatos says:

    Ultimately, the stock market is about perception and people believed whatever they imagined from Powell to push their own agenda.

    Here are my thoughts:
    1. Services inflation can only suddenly come down during a recession. I remember all those desperate contractors during the last housing bust.
    2. Rent inflation can only come down during a severe recession. I remember 50% falling rents after the dot.com bust.
    3. With dollar falling and commodities rising against it, inflation will pick up again. Two or three months of surging inflation with tank the stock market and change the narrative. Look at copper prices, with oil soon to follow now that China has reopened.
    4. Companies are missing revenue and yet they are rallying (look at Facebook today). How? 40 billion in buybacks announced from FB, 75 billion from Chevron, etc. The entire US economy has become a giant casino. There is no soft landing in any of this now that the Fed has no credibility and markets daring Powell.

    • sunny129 says:

      “Fed has no credibility and markets daring Powell’ AGAIN!

      I wish it was not true.

  21. Marcell Ledbetter says:

    Shock and Awe…weapons of mass destruction…. Don’t fight the Feds….FTX founder will be found not guilty…..rising tide lifts all boats….Powell works in the best interest of all Americans. My home hast lost $100k in value since April 2022. Over 50,000 vehicles were reported stolen in Colorado last year. Boulder public library closed due the crystal meth toxic levels. U can’t handle the truth.

  22. Jon says:

    Powell did what he had to do as he is answerable to elites and rich people.
    Common joe and poor people are kn their own
    Even if inflation goes down to zero middle class and poor people are priced out of decent life essentials.

    Its criminal thst a clique of few private bankerd have so much power

  23. JX says:

    congress, fed, market going opposite ways isn’t healthy.

    its a net loss game. this showdown will not end well for a lot of people -retirees, working people, investor, etc.

  24. SnotFroth says:

    Funny, today I got a notice of rent increase by 9.98%. Contra Costa.

  25. The Falcon says:

    At least two more 25 basis point increases. At least. No pivot. Not pivoting. Not gonna pivot. More work to do. Lots more work. Long way to go. Looooong way to go.

  26. Contramot says:

    Excellent analysis, but so what? Who cares about the exact statements? Here’s what 99% will remember from today:

    “Inflation is going down faster than expected, so I don’t need to do anything urgent. If it keeps going like this I will stop the hikes, and then do some rate cuts this year.”

    • Wolf Richter says:

      Problem is he didn’t say that. You fabricated that to suit your own agenda.

      • Who Cares says:

        That is what Contramot said that others will take that away from the meeting.
        And seeing what you have written about this for the past year I’m afraid they are right. The market will ignore the facts (at least 2 more hikes of .25% & no cuts this year) and spin Powells words, again, to mean that the punch bowl will be back shortly. That Powell is just jawboning and they’ll get those cuts this year.

        • Tony says:

          Contramot is not even smart enough to use quotes correctly, so go ahead and believe that person.

        • rojogrande says:

          From your description, the market is delusional. Eventually, reality will hit the market. Ignoring facts is not a good long-term speculation strategy. Powell has done everything he said he would do since at least Fall 2021 (too late for me, but he has finally acted). There’s no reason to think he’ll stop now unless inflation gets to 2%. In the interim, markets can be delusional and there’s not much he can do about that except stay the course.

          If Powell changes course before inflation is down to 2% or there is a severe recession with significantly higher unemployment (say 8%) I’ll be wrong and call him out. Until then, I’ll just marvel at the stupidity of market participant’s willing to “ignore the facts…and spin Powells words, again…”

      • Harry Houndstooth says:

        This is precisely why we can feel confident in shorting the markets on this rally. Widespread hallucinations.

  27. SocalJimObjects says:

    Powell has not taken the impact of the Omnibus bill into account and the administration has not refilled the Strategic Reserve. Gas will be moving up again, dragging the CPI with it.

    The real fireworks has not started yet.

    • Anthony A. says:

      We are seeing $3.00 RUG here in Houston now and $4.00+ D2 (diesel). Quite a jump from a couple of months ago. When China opens fully, expect crude oil prices to start heading up further. OPEC + can’t handle $75 crude and they will see to it that prices head up.

  28. Fed is in the catbird seat. Growth is good, two jobs for every worker. Is there something wrong with this picture, other than those nasty comparative measures of inflation when the real thing moves like a glacier. It was always transitory. Inflation and growth are the same thing.

  29. SnotFroth says:

    So I was watching the FOMC press conference video on the Fed’s YouTube channel and it’s monetized with ads lol.

    The central bank is collecting ad revenue from YouTube. I wonder if that goes into the TGA.

  30. GringoGreg says:

    A Big positive for the Federal Reserve and the economy from all the inflation and money printing is that it looks possible now, like old times, to control the economic cycles without printing fake fiat currency and by solely hiking and lowering interest rates. Time will tell. However, I doubt if they will ever be able to QT the bulk of their balance sheet for many years if ever.

  31. Depth Charge says:

    The problem I see with the FED is they showed up in a day – an emergency meeting – and hammered rates to zero the very moment the stock markets started selling off. In one fell swoop. And they immediately announced almost a trillion dollars of QE to buy treasuries and MBS. Blammo. Go big, JUICE THE MARKETS. All in a day’s work.

    Because why, a bunch of rich people were going to have to start taking some paper losses? That’s the crisis? And they followed it up with another $4 trillion or whatever over the course of several months- just printing like madmen and driving shelter costs, and automobiles, and everything else out of the reach of everybody but the most wealthy.

    But, when that REAL crisis showed up from their deranged policies – an inflation emergency on top of a housing crisis, they decided to stand back and insult society with things like “we’re not even thinking about thinking about raising rates,” and “inflation is transitory.” But this stuff was really, REALLY hurting people. BADLY.

    What’s more painful – a billionaire having to take a 50% paper loss, or a family living in a local park because their rental house was scooped out from under them by a “market disruptor ibuyer” who was loading up on shacks with Jerome Powell’s Weimerbucks?

    Look at the FED’s balance sheet and how quickly it ballooned, but how S-L-O-W-L-Y it is receding. This is the problem with the FED. It’s an emergency when it involved the wealthy, but it’s a “wait and see” when it’s hurting the middle class and the poor. I hate Jerome Powell. I hate the FED. They are the enemy of the American people, in my opinion.

    • Kevin W says:

      Good summary.

    • Einhal says:

      Look, I agree with your general view of the Fed, but they didn’t hammer interest rates down in March of 2020 because stocks were selling off. They did so because the bond market was seizing up.

      That’s the main concern. If even good companies can’t borrow in the short term, the economy collapses. That’s not to say I approve of ZIRP for as long as we had it or QE ever, but it wasn’t the stock market that drove the March 2020 actions.

      • Cookdoggie says:

        Intervening in the bond market may have been necessary. Was it $5 trillion necessary?

        • Einhal says:

          No, the scope was completely absurd, and I said so at the time, saying that we were going to have massive inflation (I have an email to a friend from March of 2020, which I just checked).

      • Bobber says:

        Why do you say the economy would have collapsed because bond market was seizing up? We just witnessed bond prices fall 20-40% in 2021/2022, and the unemployment is at record lows.

        If there is temporary illiquidity in the bond market, you let it play out until prices adjust and liquidity returns. Any entity that folds because it relies on 0$ financing needs to go away.

    • phusg says:

      Yes agreed up to a point, but his wait and see if inflation isn’t transitory position was after serious covid supply disruption and before Russia started a war in Europe, so understandable to me.

    • Escierto says:

      You are exactly right, as usual. Unfortunately the average guy on the street either doesn’t know anything about the Federal Reserve or if he does, he thinks it’s working for him. When the average American believes that the Federal Reserve is his or her enemy, then it will no longer be business as usual. That day is a long way off.

    • Seen it all before, Bob says:

      This is a good analysis.

      However, unlike 2019, they are not caving to rich people now. Probably because inflation will hurt everyone much worse in the long run. They certainly aren’t responding rapidly to help the poor and middle.

  32. Michael Engel says:

    1) High beta day. An Upthrust in a downturn is bs. The Dow didn’t care !
    2) Question : can we have 2,400 SPX, 2% inflation and soft landing ?
    3) Question : can the Fed dump RRP to zero, before $5T RRP ?
    4) Question : can RRP rate be zero and Fedrate 5.25% ?
    5) Question : will the Euro zone crack first , before US, or both crack together in unison ?

  33. Mike Herman Trout says:

    Is it possible he wants to keep markets as smooth as possible so as to give time to get the rates up high enough if he is required to cut them when he needs. More firepower if you will. He goes too hard too early the whole thing falls apart with not many bullets in the chamber so to speak.

  34. Andre says:

    Given the complacent markets and loosening financial conditions he was soft-ish. His statements were less convincing than last summer. It isn’t just words on paper, it’s the impression that comes across.

    Not really any room to debate that.

  35. ad hak says:

    Wolf, I have agreed with your interpretation of each press conference since Powell started raising rates. But not this time. I wonder how many of the people in these comments actually watched it. Maybe Powell really is still hawkish, but that is not what he conveyed today. Even his body language suggested he was forcing himself to not declare victory and he is on the cusp of declaring inflation defeated. It is not difficult to understand the market reaction whether it proves to be correct or not.

    • Wolf Richter says:

      “even his body language” … LOL. He stood slumped-over as always, his hands on the lectern. He should work on his posture. They guy’s posture is that of an old man, but he’s only 69. If you try to read stuff into his body language, you’re grasping at straws.

      • Steria75 says:

        I agree Wolf,

        There is modern evidence suggesting those who interpret body language of strangers are simply subconsciously projecting their own personal feelings and assigning those to the target individual as ¨valid body language¨. The famous Greek philosophers clearly had the same idea over two thousand years ago.

        Individuals in today´s society still place too much emphasis on the importance of interpreting things they have no control over truly understanding, for example the behaviors and feelings of strangers, hence the ¨body language¨ readings that are *de rigeur* in daily life.

  36. AB says:

    A non-event really. Just pleased the latest FOMC manipulation is in the rear view. I found the presser less hawkish than anticipated. There was a quote and a reinterpretation for everyone if one is inclined to defend a certain position.

    My reflection is that it was a masterclass in charming and coalescing the market into believing in the end game of a soft landing. Emollient, a total fallacy well presented.

    “Ongoing” infers at least two more rate hikes and possibly more. Further than plotted 0.25% increments are not big sticks with which to confront markets – however, it doesn’t matter because the big stick is QT. No change to QT will tighten financial conditions. MBS selling would be a big deal.

    The stock market has the (false) narrative and liquidity it needs to propel higher and party on for now.

    Powell sending a warning shot to Congress about the debt ceiling was yesterday’s “smackdown”.

  37. Giorgio says:

    Powell: “We can now say I think for the first time that the disinflationary process has started. We can see that and we see it really in goods prices so far.”
    – Well, the ISM explains it very well. The ISM has been plunging for months and the New Orders…at 42 (which shows the future!!) is a terrible number!!!

    Powell: “Given our outlook, I don’t see us cutting rates this year if our outlook comes true.”

    Well…A Deep Recession will come true and you’ll have to cut the rates cause you (Federal Reserve) have always been unable to predict a recession…As you were not able in 2000 when the Yield Curves inverted, in 2007 (when the yield curves inverted) as you were not able in 2020 (when in 2019 the Yield Curves inverted and even after the Reverse Repo Crisis) – The funny thing is that there are still people that trust those Clowns!…

    • rojogrande says:

      It’s politically impossible for the Fed to “predict” a recession, even while it’s actively engineering one to tackle inflation. The Fed is well aware of the implications of a yield curve inversion and continues to raise rates. Why do you think that is? The recession the Fed is “not predicting” (but actively encouraging) is needed to tame inflation. Sure, the Fed would like to avoid a recession and get inflation down to 2%, but by continuing to raise the FFR it tells you which one of those outcomes is most important to the Fed.

  38. Tony says:

    Much of the angst here isn’t about Powell’s speech, it’s about the stock market’s reaction to it. And the big rally over the last few months. I think the assumption has always been that the blow-off top already happened in the market last year. Now I’m not so sure. We actually might be rallying to the real blow off top as the market ignores the Fed. Maybe the S&P goes back up to near 4700 or even surpasses it.
    I believe reality will set in eventually, it’s just a matter of when.

    • Publius says:

      I guess it comes down to personality, but I don’t understand the enthusiasm for stocks in a risky environment (mixed economic data, possibility of recession) when Treasurys, CDs, and simple bank accounts return 4-6%. Everyone buys the 8% (or whatever) long-term return argument, I suppose, or is chasing positive return against inflation, but to me it seems obvious to earn the 4-6% and wait out the turbulence. But I don’t have a gambler’s mindset.

    • Harry Houndstooth says:

      Well, I personally think it would be unlikely that any of the averages will hit new highs. But this sharp, explosive rally is characteristic and expected in bear markets. It is the best time to get short.

  39. Digger Dave says:

    Wolf, thank you. Your reporting has shown great light on what previously was a murky (to me at least) picture of the Fed from the mainstream press.

    Reading this quote said all I need to know:

    “We have a long way to go. It is the early stages of disinflation. It is most welcome to be able to say that, that we are now in disinflation, that is great, but we see that it has to spread through the economy and it will take time.”

    They legitimately believe that inflation is slowing down, based on their preferred indices. We know that they favor a cautious approach (dovish hawks?). But we also know that they’re perfectly fine to send the inflation rate back to 2% on a slow steady decline.

    The big question is whether this is possible. That’s a big unknown. I’d say that it is not, but that is just a guess and gut feeling. But the Fed does not know this either. I don’t believe you can deflate asset prices back to what passed as pre-covid normalcy, without significantly stunting the economy.

    What I hope is learned from this era is that the FED should not unilaterally take it upon themselves to juice the markets. It’s clear that Congress likes giving away free money. The FED needs to be the foot on the brake next time. I hope that ZIRP goes down as one of the biggest follies in history and everyone involved should be forever branded as failures.

  40. WolfGoat says:

    This is interesting watching the push & pull between the Markets and the Fed.

    Indeed the NFCI does not seem to indicate the level of Financial Tightening that the Fed intends. So Powell isn’t going to back down yet. This bear market rally will peter out as earnings season comes to a close.

    Thing is I’m not buying his 4% in Core Services minus Housing. I think it’s probably more than 5%.

    Outside of Services, Truflation is showing inflation trickling back up. It was 5.3% in mid-Jan and it’s now 5.5% Basically Food & Fuel that is driving it.

    I will say that things seemed to have stabilized, but at an elevated level (~6% rather than 2%) as the Fed has indicated.

    So yes, the beatings will continue!

  41. Einhal says:

    One thing we should all agree on is that Powell is one of the worst public speakers I have ever seen (although Janet Reno gave him a run for the money). He writes well, and can prepare things well ahead of time, but he gets nervous and stutters and stammers like a high school student. In my view, that’s what the market is interpreting as “dovish.” He can’t speak forcefully and enunciate well. That comes off as weakness, and the market equates weakness with dovishness.

  42. JG says:

    The existing home market has been surging lately in my area. With rates dropping over 20% from just NOV 2022, we have seen homes get sold way faster vs last Fall. They seem very nervous about letting the housing market truly correct as it needs to…so dissapointing.

    • Einhal says:

      They’re still overpaying, unless they’re convinced the pivot will come and they can refinance into a 3% rate next year.

    • Nissanfan says:

      Because low inventory of houses listed for sale does that. Buyers are exhausted and just go for whatever is out there are this point…

    • John Townley says:

      Nothing goes to S–T in a strait line. An early spring bump coupled with a slight reduction in rates = sales. Just like last fall when the rates dropped to around 5% The market is still in trouble as long as current home owners with 2-3% mortgages are trapped in their home and unable to move up or down. Will we see FOMO this spring in the form of massive amounts of listings? I can’t wait to see what the market looks like in July.

  43. CtKahanamoku says:

    This did inform me but doesn’t address my problems or my neighbors problems. Just one example of the problems: National Grid, the primary electricity provider in Mass. just jacked up their rate tariff by a factor of 2. That translates to a family of four +1 grandparent living in a 2000 sq ft home having an electric bill of ~$400. two months ago to just receiving a bill for approximately the same amount of power for ~$800. That does not include oil heat, just electricity. I’m assuming that when the fed is done doing the magic that they do, National Grid will cut their tariff by a factor of 2 correct? Couldn’t be that the increase will be baked in forever!! Nah. Corporate America has a heart.

  44. WolfGoat says:

    Another interesting thing to keep an eye on is the Dollar Index. It has dropped from 114 to 101.

    The rising dollar was ‘exporting inflation’ and as the dollar weakens, that dynamic will shift!

    • AB says:


      Good observation. The decline of DXY is part of a wider loosening in financial conditions that is not sustainable.

      We are still very much in a bear market and when this latest stocks craze fizzles fairly soon, the usual tightening indicators will reappear.

    • Escierto says:

      Since October of 2022 when it crested just under 115, the DXY has been in a sustained decline. It’s managed a rise today to 101.69 but I doubt that it will hold this level. Maybe there will be another run at 120 as some say, but I think a fall to 80 is more likely in the long run.

  45. Anthony says:

    Does the increased government spending counter the QT by the Fed??

    • Wolf Richter says:

      No. Nothing to do with QT. The government spends money that it obtained via taxes and borrowing.

      But it does have something to do with inflation: increased deficit-spending by the government can add inflationary pressures.

  46. Viktor69 says:

    my take: banks are paid 4.65% not to lend money…

  47. Augusto says:

    The markets remind me of my dog. Every time I move, get up, change seats in the house, he starts heading to the door because of course it must be “walk time”. Even if I sit, not move and stare off into space, he will suddenly jump up and head to the exit. Of course, he knows I need a walk and the glories that follow. If he doesn’t point the way, stupid person that I am, we will not go where we need to go. Just from watching bubble vision the last month, you could see there was nothing Powell could have said that this market were not going to interpret as dovish, that is time to head for the door of glorious walks with the market holding the leash, disinflation, rate cuts, easy money…. Now if I get near the ball thrower….

  48. Cookdoggie says:

    It seems like the Fed published statement was hawkish enough, but when Powell spoke that message got watered down and misinterpreted. Clearly it would make sense for the press conferences to end and just stick with prepared statements. These press conferences are another “innovation” created by the same people who made this mess. Bernanke started them in 2011 and in 2018 Powell expanded them to occur after every Fed decision. Get rid of them and it would be easier for their message to stick. Quit coddling the crybabies.

    • Depth Charge says:

      What good is “forward guidance” when it’s wrong? Remember when they were saying “no rate hikes until 2024 at the earliest?”

  49. eg says:

    I get the feeling that many observers confuse Powell’s actions and words with the response of the equity markets, as if the former is immediately responsible for the latter. I’m guessing the relationship is rather more complex.

  50. BubbaJohnson says:

    THANKS Wolf. Appreciate the education. You can teach an old dog.

  51. joda says:

    The thing that pisses me off is the markets skyrocket because we can “forward-look” to a pivot, all because inflation MoM is at zero. All that means is annual inflation is still at a technical six, and anyone in the middle and lower classes can tell you their real-lived inflation is double-digits. Unless we get *deflation*, we’re going to be looking at $25 minimum wage and an inflation spiral. Pow needs to wake up and channel his inner Volcker.

  52. AV8R says:

    Hard landing? Soft landing?

    Pretty clear to me the objective is NO landing.

    • grimp says:

      Mid Air refueling

      • Anonymous says:

        Haha. I am in agreement with said comments.

        I expect inflation to come back w a vengeance later in the year. And Powell to trot out and lie.

        Problem is what to do…

  53. Gattopardo says:

    You know, I’m starting to think that those of us expecting a hard hit to equities have grossly overestimated how much OTHER investors would react to higher rates. Maybe the economy can handle higher rates, and the masses believe that. I recall posts in the past from Wolf saying that the market, the economy, should be just fine with higher rates (and QT), that they can handle it.

    Some of us may have expected a deeper and longer lasting drop in equities. Hence the disappointment, and in some cases here (including me), anger.

    • Minutes says:

      We have “handled” higher rates for all of 9 months. Check back in a year or two. We couldn’t handle 3 in 2018. I don’t think much has changed at all. Just that the casino is open and people are drunk inside.

    • Wolf Richter says:


      “Maybe the economy can handle higher rates….”

      Yes, the economy can handle higher interest rates just fine, and in many ways will work better with higher rates — I and many others have been saying this for years. But these higher rates come with lower asset prices because rising yields mean lower prices.

      For example: If the 10-year yield is 5%, and mortgage rates 6%, and a landlord takes all the risks and work and interest expense to be landlord, they’ll want a yield on their property that is far higher than 6%. If that same property had a cap rate of 4% a year ago, it will have to drop in price to generate a cap rate of more than 6%.

      In stocks, dividend yields of 1% or 2% are ridiculous, if the 10-year yield is 5%. No one would buy dividend stocks for their dividends at those yields, and prices will have to come down to generate dividend yields that are attractive. This has already happened across the entire space of REITs, etc.

      • Phoenix_Ikki says:

        Seems like this point is lost on a lot of flipper bros and house humpers

        “For example: If the 10-year yield is 5%, and mortgage rates 6%, and a landlord takes all the risks and work and interest expense to be landlord, they’ll want a yield on their property that is far higher than 6%. If that same property had a cap rate of 4% a year ago, it will have to drop in price to generate a cap rate of more than 6%.”

      • Gattopardo says:

        Wolf, of course I get that math. The equity market’s participants apparently don’t (or don’t care). Equities may simply be stupidly expensive in perpetuity.

        It’s also possible the equity market is looking through, looking very far forward, past any recession, etc., and to the expected earnings growth beyond. That would actually be very rational. OK, but then why the big rally now rather than a few months ago? Because participants disproportionately feared 7%+ (or whatever) eventual fed funds. That now is extremely unlikely…thus, rally.

        • Einhal says:

          That would make sense if 7% had been “priced in.” It wasn’t. And the economy isn’t growing nearly fast enough to have expected earnings growth to justify the new prices.

          The only way the new prices make sense is if not only does the Fed stop raising, but starts aggressively cutting.

          I will concede that prices are reasonable for ZIRP. They’re not for 4.5%

        • Gattopardo says:


          How do you know 7% wasn’t priced in? You can’t point to the bond market, because, well, that’s the bond market. Maybe enough equity money is indeed relieved that 7% is no longer going to happen? I don’t know, I’m just angrily speculating.

        • Einhal says:

          Gattopardo, because if 7% was truly “priced in,” no one would be willing to pay PEs of 25-30 for mature companies.

          If 7% was truly priced in, people would recognize that zombie companies would start filing for bankruptcies in mass, creating a snowball effect. That would push earnings down, and PEs even higher.

          No. What’s “priced in” is a return to ZIRP and QE. I’m convinced that even with a pause, ZIRP isn’t happening, and QE DEFINITELY isn’t happening.

      • Lauren says:

        Seems unbelievable that I can get more yield from my savings account than JNJ or Proctor and Gamble stock. I’m youngish, but this is the first time in my life that’s been possible.

    • Here it comes says:

      Gattopardo, I highly recommend you look into market analysis methods that focus on sentiment. It’s vital to understand that the Fed does not control the market, and what the Fed says and does also doesn’t really relate to the market’s moves. It can be argued quite well that the Fed just follows the market, and when the Fed tries to fight it – it loses.

      I made a post here on the day we bottomed in October last year saying we had likely hit a multi-month bottom today, with a move going back to probably 4300, if not new all time highs. Many people obviously disagreed because of fundamental reasons, and I can’t say I blame them based upon that reasoning.

      I posted again over a month ago when we were around 4100 that we were likely turning back to the 3700 region, then we will make a big bullish move up to 4300. It’s played out almost exactly as I wrote.

      The tools I use for analysis are completely based on sentiment. Fundamentals are totally ignored. Yesterday we were at a bit of a crossroads when the Fed meeting happened, possibly going up or down. But if we dropped, it should have been fast and hard. When we didn’t do that, it told us the market was ready to rip higher.

      I don’t post this to make arguments or sound smart because I’m not the one who invented the analysis tools. But I highly recommend if you want to understand why the market is so seemingly illogical that you look at understanding it from the other perspective.

      Wolf’s analysis here is totally legitimate, but it only relates to the equities over a long time horizon.

  54. KGC says:

    It will be very interesting to see how this plays in the EU. They just admitted two more marginal economies (Romania & Bulgaria) and at the same time they are working to insure that the major players in the last downturn don’t break ranks and try to leave this time.

    • Wolf Richter says:

      ??? Romania and Bulgaria were admitted to the EU in 2007. Last year, they were rejected from entry into the Schengen area. Neither one of them is part of the Eurozone.

      • Escierto says:

        I don’t know how you manage to keep up with all the misinformation. “Just admitted to the EU”? Yet it happened 16 years ago! It seems as though everyone posting has decided to invent their own version of the “facts” unless you call them on it!

  55. The Fed said, interest rate hikes don’t work, we quit. You’re on your own.

  56. Jackson Y says:

    Cleveland is estimating +0.63% CPI & +0.47 PCE month over month for January 2023.

    But their model has overestimated in each of the last 3 months, when inflation clearly began decelerating.

    Per FRED, the average monthly oil price only went up $2/barrel ($76 to $78) between Dec 2022 and Jan 2023, and we’ve only gotten those +0.5% M/M numbers when oil was up significantly.

    I wonder if a +0.5 CPI / +0.4 PCE would be enough to guarantee at least a 5% FFR peak rather than the ~4.75% priced in by markets, and reverse some of the speculative stock market excess since Oct 2022. A +0.3/0.2 would probably continue the rally.

  57. DougP says:

    “It is difficult to get a man to understand something when his salary depends on his not understanding it” Upton Sinclair

    One of the many things I have learned from Wolf is that the Fed always does what it says it will do, and it always tells you what it is going to do.

    Recent history has proven that many times, and yet there are still those that choose to believe otherwise because it is in their best financial interests to do so.

    It is fun to watch though.

  58. Concerned Citizen says:

    A question about moderating posts. I fully realize this is your website and you have the right to block any and all content. However, I posted evidence the Federal Reserve is still providing liquidity to our overheated market via Reverse Repos. If banks need overnight loans, the market is still providing fuel to the economy and should allow the Fed to pull even more liquidity. Why would the Fed keep juicing this market?

    I did put a legitimate link into my post referencing the ST. Louis Federal Reserve.

    You do not have to do this but please explain why you blocked me?

    Thank you.

    • Wolf Richter says:

      You posted a clickbait teaser line (zero info) and link. This violates commenting guideline #5:

      “5. The comment section is not a link dump. A link to a source when needed, or when asked for by another commenter, is encouraged. I remove most other links. When a comment is a one-liner and a clickbait link, the entire comment gets shredded.”


      In addition, your assertion — “Federal Reserve is still providing liquidity to our overheated market via Reverse Repos” — is BS. It’s the opposite, if anything: Reverse repos (RRPs) act as a liquidity DRAIN and remove liquidity from the market. RRPs are a liability on the Fed’s balance sheet, not an asset. I have discussed this a gazillion times.

      You’ve been a commenter here for a while but apparently have never read any of my articles about RRPs, or else you would have known this and not posted this BS.

      • Concerned Citizen says:


        The link was not clickbait it was a pointer to the St. Louis Federal Reserve.

        As to the Reverse Repos, Governor Chris Waller has spoken that “he views RRP balances to be fungible to bank reserves.” I won’t put the link so I do not get in trouble but I believe it was an interview on CNBC on 1/20/2023.

        • Wolf Richter says:

          Bank reserves are liabilities on the Fed’s balance sheet, just like RRPs, which I said a million times. The first represents cash from deposits, the second cash from money market funds. Neither one of them is QE (assets). Calling the RRP balance or reserves “QE” is just BS. If anything, they’re the opposite, a liquidity drain from the market. Get off of it.

          If you don’t know what you’re talking about, don’t make those BS assertions.

          I’m done.

      • Blam35 says:


        Your the best and the reverse repo now is the reality but the repo facility should be shut for when the banksters line up for the repo facility for their endless rolling 14-31 day loans to enable price discovery on those marginally fungible real estate assets.

        Although I agree with your interpretation of Powell I wish I shared your faith he would stay the course and I hope tomorrow’s story reflects affirmative selling of mbs to make up for sub 30 bil sheds in past months, re fi & principL pass thru won’t do the job of offloading mbs at a decent clip.

        QE has been way too slow to discourage the mass hallucination, I’d be dancing if he sold off 300 bil of mbs without warning, oh a happy day that’d be.

        The 2021 house price surge was the obvious time to divest mbs and the fact that no move was made shows his allegiance to supporting bubble dynamics; and so Mr Market is rightfully skeptical of his fortitude.

  59. Matt says:

    How is everybody so pissed here? His speech was great. He allowed bears to have a fantasy and bulls to have a fantasy. Market is forward looking and the takeaway is disinflation. Bears mad they didn’t buy? There were plenty of of opportunities.

    • Gattopardo says:

      “Bears mad they didn’t buy?”

      Yes. I am.

      • Anonymous says:

        The timing is the problem. P/E ratios are out of whack. Bubble is massive. Without insider knowledge, no way to time. You’ll end up holding the bag if you play and eating it if you sit in regular cash.

        Have to get some return and try to lose less without playing stock market unless you’re an expert. Very difficult situation with equities. International is looking even worse. Nowhere to run. So inflation will continue since not enough bag holders have come into the market for them to dump. So will keep pumping and Fed Reserve will continue to play along. Stay safe guys.

    • Depth Charge says:

      “Bears mad they didn’t buy?”

      Many of us don’t gamble in the stock markets, heaven forbid crypto, etc. If the DOW fell to 10k tomorrow, I wouldn’t buy. We are concerned with the destruction that is happening daily from the reckless FED, and their “late to the party” inflation fight that seems lukewarm at best.

      I have not heard any reasonable argument as to why it makes sense to step quickly down to 25 basis point rate hikes when the fed funds rate is still far short of CPI, meaning negative real rates. As Stanley Druckenmiller has astutely pointed out, “never before in history has CPI above 5% come down with a fed funds rate below CPI.” That right there should have been their clue to at least stick with 75 basis points until the fed funds rate rose above CPI, THEN scale back to 25 basis points.

      What they are doing is erring on the side of “letting inflation rip” rather than the opposite which is “snuffing it out too aggressively.” All of the talk about how aggressive these 75 basis point hikes were, and “never before in history has the FED moved so far so fast” ignores the fact that never before in history has the FED and .gov ginned up over $10 trillion in liquidity and dumped it on an economy in mere months, while simultaneously allowing debtors to not pay bills and go ape sh!t on everything while the FED sat back when inflation was roaring and said “transitory!”

      • Swamp Creature says:

        The real CPI is on hell of a lot higher than the figures published by the government. I just went to the grocery store today and some essential items I’ve been buying for the last 10 years just went up 30% over the price I paid 3 months ago for the same items. Essential items! I don’t believe any of the garbage data coming from the government anymore. They are all a pack of liars. Unfortunately, a lot of this BS data finds its way onto this Website. Something needs to be done to give us the real inflation data that affects our pocketbooks. I’m not holding my breath.

  60. nick kelly says:

    To anyone who thinks a mere .25 bump is a ‘pause’ or pivot or good news because it wasn’t .50, try the following:

    Tell someone to hold their breath for ten seconds. Then at second nine, tell them ‘another ten seconds’ then at second 19, ‘another ten seconds’.

    At some point a ‘mere’ ten seconds is a very severe test because it is an additional ten seconds, on top of a preceding period of oxygen deprivation.

    This .25 bump is a much bigger deal than an early .25 or even a .50, because it is additional to seven preceding bumps, all since March 22.

    If the market wants to move higher based on this, plus Powell’s clear statements that the job is not over, then the reckoning will be that much harder.

    To achieve a soft landing the plane must gradually descend.

    • Anonymous says:

      Problem is that the federal reserve gave this swimmer massive amounts of oxygen tanks to begin with so the swimmer is still swimming just fine laughing at everyone else who doesn’t have an oxygen tank and is trying to hold their breath.

      Most cannot last long enough for the big boys who got tons of cheap funny money to run out of funny money and implode unless the fed reserve is more aggressive in stopping the price increase regardless of what happens to the big boys.

      Powell’s speech was very dovish even though he said there was no pivot this year. Just leaving the rates be was dovish. He should have come out and said clearly: markets clearly don’t believe in us. We will raise rates until the gambling behavior of the stock market casino moderates and prices reset to norms… But it’s not what he said.

      He is pretending to fight inflation while defaulting via inflation on the less connected. It’s aggravating to watch that guy talk out of both sides of his mouth. Although I am tempted to accept he isn’t sincere and go into the stock market, I suspect that as soon as enough people sufficiently do so, the big boys will pull their money out and Powell will induce the crash/recession aka find other bagholders except themselves but not until then. Inflate until desperate inflation bagholders give up and accept being stock market bagholders. Defaulted on via inflation or via stock market when the connected players move. That’s my feeling based on yesterday’s speech. This is some really slimy stuff.

  61. The Real Tony says:

    At least he didn’t bend over backwards and try to save the people underwater on their mortgage like Tiff at the Bank of Canada. Core inflation is running much higher in Canada and shows no sign of falling.

  62. duane says:

    In regards to slowing down on the rate hikes I would reply, “only when the price of eggs comes down”. Mic drop!!

    Seriously, I love me some eggs and hate the prices right now.

  63. Citizen AllenM says:

    Just an amazing level of resistance to a significant regime change in interest rates. So many people are engaged in denial of the obvious. Go down to your local bank and see what they are charging for interest. Zero is done and most likely not ever to return. The real problem is going to be what happens when we reach a new level of stability in the national economy.

    In short, Powell has told everyone that this is going to be the new interest rate policy until inflation is under control. Numbers come in hot, up go rates. I guess the big problem was when they tried normalize policies without the push of higher inflation. Now they*must* continue until the monster is dead. The damage to the speculating public is unimportant.

    Remember fondly the last decade, because it’s now history.

  64. Spencer says:

    It’s encouraging that someone can interpret FEDspeak. The press sure isn’t good at it.

  65. Quadrillion says:

    Hi Wolf, the market is being driven by major corporate stock buybacks and the world has 1.3 quadrillion in leveraged derivatives.

    • Wolf Richter says:

      That’s “notional value” of derivatives. People like to throw that around because it’s an impressive number, but…

      OCC: “The nominal or face amount that is used to calculate payments made on swaps and other risk management products. This amount generally does not change hands and is thus referred to as notional.”

  66. Bobber says:

    It appears there is only one way to reduce the speculative frenzy in equity markets that is getting in the way of monetary policy. When the market expects .25%, give them .5%. If they expect .5%, give them .75%.

    This cat and mouse game is getting ridiculous. The cat needs to bite a leg off the mouse, so it won’t run so fast.

    • Jon says:


      I love your opinions. From what I’ve learned from Wolf, this scenario played out in the late 1970s, too. If so, the JP is just going to raise and raise and raise until they get the hint. Do you see that as a scenario?

    • Seen it all before, Bob says:

      I think the Fed tried the “Shock and Awe” in 2022 and that sort-of worked. It wiped out the speculative no-profit companies. Wolf provided a great list.

      Being a controls engineer, the economy took this impulse very well. No recession. However, it takes time to for the effects to propagate.

      If you hit a modern airplane with a 300MPH wind gust, it may not crash immediately (Thanks Boeing!). However, you need some time for the aircraft to stabilize for a soft landing before you hit it again with another 300MPH wind gust. I compare that with the Fed response today. They should have slowly ramped up the wind gusts from 2018 so the economy could slowly adjust. But they didn’t, idiots! Due to the Fed, the airplane we are flying went from 30,000 in 2018 feet to 100,000 feet in 2021 and then plummeted to 70,000 feet in 2022 and is trying to recover. It may not take another 300MPH wind gust before it crashes to 0 feet. If the idiot pilot (The public and Wall Street) tries to climb back to 100,000 feet before fixing what is broken, it is likely a crash will occur.

      • Depth Charge says:

        But it didn’t “wipe them out.” Their stock prices are roaring back, going parabolic. Even the most ridiculous, valueless widgets like crytpo tokens are skyrocketing. It’s pure, 100% speculation due to too much money in the system. The FED has quite simply not removed enough liquidity. There is no other way to spin it. The FED is late.

        • Seen it all before, Bob says:

          This will not be a smooth flight. The Fed’s main job is to prevent this and they caused it and are late and failing at fixing it. Now, I’m sure they want to send another wind gust (missile) at the plane to warn the exuberant drunk pilot, but they are afraid to crash the entire plane. Banks don’t like deep recessions either.

  67. rojogrande says:

    How did Powell cave/pivot?

  68. jon says:

    It does not matter what he really said. What matters most is what signal he sent out.

    If Powell was really hawkish then I’d day he got a very bad communication style.
    Bottomline: He sent dovish signals out there and thus the market rallied. Whether he did on purpose or by mistake, who knows ?

    But we know, Powell works for the rich people, not the poor or middle class.

    • Einhal says:

      Again, what “dovish signals?” All of this nonsense reminds me of the stalker who thinks a woman is obsessed with HIM, because she once nodded at him.

    • Jaro says:

      I agree. As Wolf has said, many of Powell’s policy replies were technically hawkish, but I got the impression the man was in a fog and did not quite know how to answer some of the questions.

      Mortgage rates are dropping, the dollar is dropping. Is that hawkish? Poor Americans will be destroyed by dollar weakness alone.

      Time to move into metals, commodities big time. The Fed can’t be trusted to do anything but rally markets. That they’re good at.

      • Wolf Richter says:

        “…did not quite know how to answer some of the questions.”

        LOL, yes, that’s why I quoted some of those inane questions in my article. The guy has to be polite. He can’t tell a reporter, “Stupid question. Next.” But how do you answer a stupid question?

        • Einhal says:

          Reminds me of a news story I saw years ago where a person had died. The reporter asked “Did his heart stop?” He was being completely serious…

  69. Michael Engel says:

    3 x CB : hike, hike hike, SPX take a hike. Oct low is a failed spring. Aug high was a failed UT > May high, that led to Oct low, a lower low.

  70. yubeie says:

    My wannabe realtor as usual trying the FOMO trick…
    Here is the note:

    “The FEDS went with a 25bps rate hike yesterday. Remember these hikes are built into the market. The rates actually bounced back after their commentary and rates dropped some. I am seeing some people getting into the 5’s now. Looks like we will see rate cuts built into the market starting towards the end of 2023. We might have seen our peak and rates will start to ease more. We don’t expect rates to be lower than 5 the rest of the year and with that said we could see multiple offers again.
    if you see any homes of interest or have any questions do not hesitate to reach out to me anytime. It would certainly be my pleasure to assist you and your family find the perfect place to call home!”

    My response: Stay quite and let them keep spamming!

  71. gametv says:

    I just keep thinking that the core reason the markets are so swift to loosen monetary conditions is that the Fed still has 8 trillion or so of debt on the balance sheet. It is being unwound at a very slow clip relative to the way it was built up.

    I think that what the Fed is going to do is to move toward lowering interest rates rather quickly, but then combine that with a faster pace of selling off the assets. What is interesting to me is that the last time they tried to sell off assets, they didnt get very far before there was a crisis and they decided to reverse course.

    What we should all know by know is that these markets are 100% dependent upon the Fed and other central bankers to prop up their assets. The only question is whether the Fed cares more about financial market players or the general population. I think they care more about the rich financial market players.

    • Swamp Creature says:

      The Fed doesn’t care about the general population. They want to keep stability in the financial markets. If the financial markets fall apart then we will not have a civil society left. Already, crime is completely out of control in the major cities. A Metro employee here was just executed yesterday for trying to break up a psycho killer’s rampage. We have a large number of mentally ill persons roaming the streets here along with violent criminals out of jail on little or no bail. I think the average person doesn’t care what the Fed is doing or plans to do, they are just worried about their own survival.

    • Jackson Y says:

      Regional Federal Reserve banks pay their presidents $400,000/year. Governors are paid more modest salaries, but look at their financial disclosures they’re all multimillionaires.

      These are not Main Street Americans who do their own grocery shopping. Of course their job is to serve rich financiers.

      And FOMC member is rarely a retirement-track job – nearly all of them leave to the private sector. They’ve also got to keep their future employers happy.

      • Prarie Rider says:

        Jackson Y,

        Actually, the Minneapolis Fed president does his family’s weekly grocery shopping. My local newspaper had a feature on him doing just that a couple weeks ago. Part of the story was his turnaround from dovish to hawkish and advocating rate hikes. And, this year Neel K. is a voting member of the FOMC.

        ‘Grocery shopping with Minneapolis Federal Reserve president: “It’s sticker shock'”

        By the way, the man has a B.S. & M.S. in mechanical engineering and worked on the guidance system for the James Webb Space Telescope back in the day. Smart lad, I reckon. Probably made a few bucks working at Goldman Sachs, though.

        (His grocery bill was $375)

  72. To predict the future just ask yourself how many .25 to get to 2 percent.

    Wolf is right.

    Of course, all this just solves the short term inflation problem but not equilibriumphobic nature of the economy.

    I generally suggest hyper-progressive consumption taxes for that, but try not to bring it up too often since it challenges dearly held long term beliefs, which people do not like.

  73. SocalJohn says:

    Systemic Cognitive Dissonance. SCD. Kinda like STD. The markets are infected.

  74. SnotFroth says:

    The Bloomberg commentariat was rather stunned by the market reaction yesterday. Exasperated Tom King suggested it was a short-covering rally.

    Seems the market looked at JPow, saw white wings and a little beak, and heard gentle cooing sounds behind his resolute words. The dove days of winter are upon us.

  75. Halibut says:

    These bulls have such incredible auditory acumen that they can decode every word that Powell did not say.

    Yet, the yield curve tornado siren, that is splitting my skull, is inaudible to them.

    • jon says:

      Don’t trust the yield curve as Bond market is all manipulated by FED.
      You can trust Yield curve if Bond markets are free for that FED need to unload huge amount of bonds and stop buying bonds.

    • Seen it all before, Bob says:

      It is overwhelmed by the cash-rich drunken public screaming “I’m not going to shelter in the basement! This time it is different!”

      • Seen it all before, Bob says:

        Don’t look up!

        • CrazyDoc says:

          Something that just flashed in front of my eyes

          The S&P 500 is flashing signs that the bear market finally could be over

        • Seen it all before, Bob says:

          Optimism reigns in a Bull Market and a Bear Market rally.

          We have no lack of optimism.

          If the cops (The Fed) stop trying to break up this party, it will go on forever! I think the Fed said yesterday that they want the party to stop, and there are less parties, but they aren’t enforcing curfew as much anymore. Eventually, the punch bowl will empty and the drunks will go home on their own.

        • Seen it all before, Bob says:

          At “Last Call”, the party always picks up for a while.

  76. David Hall says:

    The December core PCE inflation rate lowered to 4.4%.

    The Fed funds rate is now 4.5% – 4.75%.

    An amateur investor might be able to keep up with core PCE inflation. The Bankrate web site is offering FDIC insured one year CD’s paying 4.5% to 5%.

  77. Swamp Creature says:

    If Trump gets elected in 2024, he said he intends to fire as many Federal workers as he can legally. That should do wonders for RE here in the Swamp. Prices are already off 15% for the median home price since June 2021, according to MLS. Far worse that Phily or Baltimore. He’s going to make Elon Musk look like a Sunday school preacher. He may even put him as his VP to oversee the firings

    • Cytotoxic says:

      “If Trump gets elected in 2024”

      LOL not going to happen, and even if it did, he’s not going to fire anyone. Trump, like all conservaderps, loves Big Government so longs as it’s his.

  78. sunny129 says:

    The S&P 500 Index SPX, 1.41% has finally broken through major resistance at 4100. If the breakout holds through today, then it will be a valid one. Furthermore, SPX is now clearly above its declining 200-day moving average, and it is above the downtrend line that has defined the U.S. bear market for over a year.

    Thank you JP

  79. sunny129 says:


    even though the “FOMC Statement was Hawkish: kept ‘ongoing’ and ‘appropriate’, however “more importantly presser was dovish: 1) Powell’s disinflation language (“we can say the disinflation process has started”, something that’s “welcome, encouraging, and gratifying”) and 2) the fact Powell didn’t warn markets RE easing financial conditions in the last few weeks.” In knee jerk reaction bears everywhere were steamrolled as Powell triggered a marketwide short squeeze.

    Well done JP

    • Jackson Y says:

      This is not a short squeeze. The “bear market” (if one existed in the first place) ended in October. Anyone who continued shorting after 6 straight months of decelerating Y/Y inflation (the market’s #1 concern) is gambling with his money. But the current move up is extremely overdone.

      • Michael Engel says:

        5 Nasdaq stocks are leading the charge. Investors fell in love with Meta, the most hated stock since they changed their name from FB to Meta…..

      • sunny129 says:

        Jackson Y

        Ending of secular Bull or Bear mkt is only obvious in hind sight.
        There will be many ‘mini bears’ within the bull and vice versa.
        It took nearly 2.5 yrs to ascend (bull) another 2.5 yrs to descend (bear) to complete

        If one accepts this ‘symmetry’ theory (Charles H Smith – oftwominds) this secular will have mini bulls and end finally(?) in late 2024 or early 2025. Wait n See

        • sunny129 says:

          It took nearly 2.5 yrs to ascend (bull) another 2.5 yrs to descend (bear) to complete
          Dot com bubble in 2000

  80. Jackson Y says:

    It’s called the Federal Reserve Put for a reason. It’s because their policy reaction to the stock market & asset prices is entirely asymmetric.

    When the market falls, it’s because something is terribly wrong with the economy and rates must be lowered ASAP.

    When the market goes parabolic, they look the other way & say “it’s not our concern, we don’t target stock prices, etc.” Instead of, maybe the economy is doing better than expected & further tightening might be warranted.

  81. Michael Engel says:

    The big whales turned red in the AH.

  82. Pete Koziar says:

    “Such are promises
    All lies and jest
    Still a man hears what he wants to hear
    And disregards the rest”

    – Simon and Garfunkel, lyrics of “The Boxer.”

  83. DawnsEarlyLight says:

    Are you the creator of the phrase ‘enough is enough’?

  84. Michael Engel says:

    Ford is down in the AH. Their gold mine F-150 profit is down because of chips shortages.

  85. Robert Blum says:

    Wolf, I know that you have commented about the Federal Reserve’s golden path having a targeted inflation rate of 2%, BUT it still seems as though it is one of those guaranteed negative measures to the health of the USD (other than a measure to assist in masking the inability to pay down the ever increasing national debt).

  86. Matthew Scott says:

    There is no good fed policy when it comes to the interests of the working people. Inflation or recession. “Good” economic times or “Bad”. All is run in the interest of the .01% and it is their interests, over the long term, that the Fed and the rest of the government seek to protect. ultimately at the expense of the majority both in this country and around the globe. It is the same with tax policy or trade or anything else both sides of the political spectrum are simply advocating what they feel best advances the interests of the elite

  87. Gen Z says:

    Glad that the US central bank czar is not obligated to the asset-rich who get cheap loans on ZIRP policies.

    Canada’s benchmark rate is paused. This means our Loonie might, theoretically, risk being worth less in the near future if the FED keeps increasing rates.

    In theory, a low loonie makes imported produce from California, Florida or Idaho more expensive, increasing inflation.

  88. Nate says:

    So goes inflation, so goes the fed.

    I don’t get all the post-fed action before the inflation reports, but I guess speculators gotta keep on speculating.

    I mean earnings seem down, particularly with tech, and while the usa p/e looks better, the cape is still bad. So this doesn’t seem fundamentals driven. OTOH I don’t think the world will end because we go back to 90s rates. It’s nice that people can hold treasuries and not feel like a moron.

  89. Cytotoxic says:

    What I think is most notable is that the move to raise by 25 bp was unanimous. No dissident-dove faction to eventually gain the majority it needs to stop being mean to the markets. Not yet at least.

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