Here’s my Powell Cocktail, Not Quite in his Own Words

It’s premature to think rate cuts are right around the corner, we haven’t decided anything yet, it’s meeting by meeting, but in March no way Jose, I mean, that’s not my base case.

By Wolf Richter for WOLF STREET.

Powell’s press conferences that follow the FOMC meetings are somewhere between a hoot and a mess, because the reporters are trying by hook or crook, with often inane questions and speculative scenarios, to get Powell to say something that, when read in between the lines, could be twisted into “Powell was dovish,” which has been standard operating procedure for the past 18 months.

So, while we wait for the “Powell was dovish” commentary to come out of the woodwork, I have created a cocktail that consists of quotes of what Powell said, and summaries of what he said, at today’s post-meeting press conference concerning inflation and rate cuts, all mixed together, stirred, not shaken, and served with a smile.

Here’s the Powell cocktail, not quite in his own words:

We’ve jacked up our policy rates by 525 basis points over the past two years and moved it well into restrictive territory, and we’ve done nearly $1.3 trillion in QT, we’ve significantly tightened monetary policy, and we have been seeing the effects on inflation.

Inflation has eased over the past six months, and that’s very good, so I’d say our policy rate is likely at its peak for this tightening cycle, but we will need to see continuing evidence to build confidence that inflation is moving down sustainably toward our goal before we cut rates.

But this cooling inflation could be a head fake, the decline in prices of durable goods might not last, and rent inflation might not play along with it, and other services might not play along with it, so we’re not rushing to cut rates, we’re going to watch this carefully.

The economy is good, it has expanded faster in 2023 than we expected despite the tightened policy. And the labor market is rebalancing well, it’s still tight, and the pay increases are still strong, but it’s not out of whack like it was.

We’re not trying to slow the economy, but we need to make sure that inflation actually stays on track to 2% core PCE, and we need to make sure that we don’t fall for a head fake. We want to take advantage of this situation and finish the job on inflation while keeping the labor market strong.

So you ask, a rate cut in March? It’s premature to think rate cuts are right around the corner, we haven’t decided anything yet, it’s meeting by meeting, but no way Jose, I mean, that’s not my base case.

That’s why we included that rate-cut mania push-back language in the statement, to signal clearly that, with strong growth, strong labor market, inflation coming down, the committee intends to move carefully as we consider when to dial back the restrictive stance.

We will be data-dependent as we approach that question of when to begin to dial back restrictions. We will be looking at this meeting by meeting. But based on the meeting today, I would tell you that I don’t think it’s likely that we’ll reach a level of confidence by the time of the March meeting to identify March as the time to cut rates.

But that doesn’t mean we wait around to see the economy tank, because it’ll be too late. We are really in risk-management mode – of managing the risk that we move too soon or move too late.

So there is a risk that inflation will re-accelerate. When we look back, what will we see? Will inflation have dipped then come back up? Are the last six months flattered by factors that won’t repeat themselves?

Of course, if inflation were to surprise by moving back up, we would have to respond, and that would be a surprise at this point, but that’s why we are keeping our options open here, and why we are not rushing.

But I think the greater risk is that inflation will stabilize at a level meaningfully above 2%. That is more likely to me.

Both of those are risks, but I think the more likely risk is that inflation will stabilize at a level meaningfully above 2%.

If we see inflation being stickier, or higher, or those sorts of things, we would argue for cutting rates later.

If we see an unexpected weakening in the labor market that would certainly weigh on cutting sooner.

So you ask, what good reason is there to keep policy rates above 5%? As you know, almost every participant on the Committee believes it will be appropriate to reduce rates. We feel like inflation is coming down. What we are trying to do is identify a place where we’re really confident about inflation getting back down to 2% so we can then begin the process of dialing back the restrictive level.

The median participant wrote down three rate cuts this year. But I think to get to that place where we feel comfortable starting the process, we need confirmation that inflation is in fact coming down sustainably to 2%.

So you ask, will this rate cut when it finally comes, be just a one-off? You know, that will really depend on how the economy evolves. We’ll be looking at the economic data, and we’ll make our decisions based on that. There are risks that would cause us to go slower, for example, stronger inflation. And there are risks that would cause us to go faster or sooner, for example, a weakening in the labor market or very persuasive lower inflation. So we will just be reacting to the data. That is the only way we can really do this.


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  147 comments for “Here’s my Powell Cocktail, Not Quite in his Own Words

  1. Steelers Fan says:

    BUT BUT BUT, If you read between the lines he said “dovish pivot, QE, rate cut tomorrow. 😂

    • Biker says:


    • J. Pow says:

      The 10 year dropped below 4% easing liquidity. My job of confusing update was a success. The media was able to spin rate cut narrative and the coc… high investors bought it.

      I am a genius, you all must thank me again.

    • BENW says:

      “If we see an unexpected weakening in the labor market that would certainly weigh on cutting sooner.”

      The Fed isn’t going to cut rates until employment starts to really soften. I would say that’s ~ 4.2%. With the labor market remaining so tight, housing will move higher with a meaningful cut in rates (i.e., 50 basis points or more). And that would be very bad. And there’s maybe a 20% chance core PCE moves down to 2% without an erosion in employment.

      Last, it’s interesting how nothing was said about the geo-political environment. I will be stunned if oil isn’t moving much higher by the March meeting due to escalating conflicts in the middle east.

  2. Blam 35 says:

    Now his fed guys are gonna jump on TV about possibility of rate cut in March lol

  3. Kathryn Drake says:

    Loved your take on the Powell.

  4. Gary says:

    Powell says the rates are at restrictive levels, but for us who were alive in the 1970s and watched the early 1980s, these interest rates are not even close to restrictive, they were the “good ol days” back then. Amortization schedules didn’t even go below 7%. Younger people may believe Powell, but his words are like fingernails on a chalk board to any older person who experienced inflation and the absolute relief when Volcker stopped it. Just look at the election of Ronald Reagan as an example of the popular distress over the economy, with the exact same scenario to play out with Trump.

    • Kent says:

      In 1979, the inflation rate was 13% and rising, unemployment was 6% and rising and the fed funds rate was 11% and rising with Jimmy Carter appointing Paul Volker to get inflation under control.

      Today, the inflation rate is 3.5% and declining, the unemployment rate is 3.7% and going sideways, and the fed funds rate is 5.3% and going sideways.

      The elections are going to be decided by two groups: on one side are the folks who like to eat out every day, trade in their pickup truck every year for the latest and greatest and pay rent, because they can’t save enough for a house. They’re being slaughtered by inflation in those sectors. On the other side is everyone else.

      • Publius says:

        There are two groups of people: those who believe there are two groups of people, those who believe there are more than two groups of people, and those who believe there is one group of people.

      • ru28 says:

        Oil and Nat Gas are inputs into a lot of things. Adjusted for inflation, they are very low priced relative to all other stuff. Adjusted for inflation (real dollars), oil is selling at $50ish barrel in 2000 money and nat gas is probably at $1.5

        Nat gas was in the 5ish range in 2000 and adjusted for inflation, it should be about $8. It is $2.10 now. The price of oil was $76 in 2010 and it is now $78. Adjusted for inflation is should be $106. In real terms, energy has dropped in price. Thus it is cheaper to drive a round town and heat your home now than in 2000.

        Electricity via renewables are being subsidized by the Government which is also bringing down energy costs relative to inflation. EVs (10% to 20% subsidized via tax credits) , solar panels for residential housing (-25% subsidized), solar panels for businesses (-75% subsidized), etc

        I don’t think people realize the effects of energy prices in everything. Manufacturing, transportation, heating and cooling, datacenters, cell phone infrastructure. This helps boost profits for companies. Low energy allows people to spend more on discretionary items.

        The average electricity rate in the U.S. is .14 cents. In 2000 this rate was .09 cents. But in todays dollars, that .09 cents of electricity would be .16.5 cents in 2000. In essences, we are paying about 10% less for energy now. Or should I say you $1 of take home pay is gets you 10% more energy.

        I am just trying to look at a positive. These are quick and dirty calculation from eyeing charts so do not take the number as exact.

        • Blake says:

          I definitely agree that energy prices are very low overall and that’s actually keeping the numbers in check, for now. Because you are right, it indirectly feeds into everything…. with a huge lag in many things, but still there.

        • Legal Economist says:

          Actually, the EIA says the average US residential electricity rate in November 2023 was 16.19 cents. So, just a little bit cheaper, but not 10%. And, of course, much more expensive in various regions – New England (27.4 cents), Mid-Atlantic (19.8 cents), West Coast (21.52 cents), and Alaska/Hawaii (35.05 cents).

        • Cookdoggie says:

          Similar to those locked into their house with a low mortgage, guess I’m locked into mine with a low electricity rate: 9.5 cents. Our town has a wholesale rate deal with a hydro dam.

    • Brian says:

      I get that the Fed _could_ lower rates as inflation comes down but why _would_ they so long as the economy (and stock market) are doing so well? It doesn’t seem to need any stimulation. Wouldn’t it be better to keep “dry powder” around for when it’s actually needed?

    • Mark says:

      Gary : I remember too ……

      5.5% Fed Funds rate now

      20% Fed Funds rate in 1982 (Volcker)

    • The Struggler says:

      Gary: Restrictive is not an “absolute number.”

      I was born a month before the end of the 70s: No memory, only my dad telling me about the 20% mortgage rates (on $20,000 duplexes). Also telling me about the 80% tax bracket HIS father was in, post WWII.

      We’re closer to a 40s-50s style debt level (and maybe demographic?) than the 70s.

      Also the 70s saw the advent of a floating (fiat) currency and the very beginnings of deficit spending.

      Today public and private debt burdens are bloated worldwide. The whole world had to run on credit to keep in the race.

      ONE country kept up/ threatening to pass US. Now China is in the midst of a credit/ RE deflation and a demographic nightmare on the horizon.

      EU is stagnant but not dead/ taking notes from the printing press.

      I heard it said that today’s 5% is equivalent to the early 80s 20% due to the quadrupled debt: GDP ratio.

      Look at last year’s GDP prints yielding today’s headline: US winning the World Economic War. We are leading the race of the rich and have the real resource, demographics (especially when importing labor/ my helper fuera hablando como este hoy), and government backing (Inflation Creation Act onshoring) to KEEP winning.

      I don’t like the manipulation, but I LOVE the quality of life.

      Hate, hate HATE inflation and spending daily! I am a parent, not a retiree (but my Dad at 80 loves his COLA/ even as a diabetic).

    • Anthony A. says:

      I recall back in the early 1980’s when I lived in California and had an 18% mortgage. I thought I died and went to heaven when I refinanced it at 10%.

      • VintageVNvet says:

        10-4 AA, we had one at that rate also in CA at that time; however, the price we paid for the house was exactly $40,000.00
        EXACT same house was priced at $800,000.00 last time it sold a couple years ago.
        Don’t think inflation, AKA degradation of fiat money has been that bad for the last 40 years, but maybe it has???

  5. Phil says:

    I believe he mentioned briefly about the sticky inflation that’s still so high, (like new car prices. Yes he discussed high rents.) A certain amount of the middle class and much of the lower middle and lower economic classes are being hurt bad by it and in many respects (I think) unfairly blaming Biden for most of it. Interesting coincidence perhaps that Powell is a republican.

    • phleep says:

      Fed Chairs straddle different administrations in unexpected ways. Volcker was nominated by Carter. Bernanke was nominated by Bush II. Sometimes they do things seemingly calculated to benefit “the other team.” It doesn’t seem very linear.

  6. HR01 says:

    Great stuff, Wolf.

    Have no idea what these Wall Street pundits are smoking that they were under the impression that rate cuts are imminent…but it must be really potent stuff.

    IMO, no cuts in 2024…but risk of further hikes instead.

    • Finster says:

      The Fed doesn’t like to surprise markets, so by manipulating expectations, Wall Street is pressuring the Fed.

      • Apple says:

        5% rates will be around as long as the economy keeps expanding, at least another year.

    • Chris Brown says:

      If the job market turns, they likely cut. Not sure if election year plays any role as well. J POW has done a decent job.

  7. Seba says:

    “we’ve significantly tightened monetary policy, and we have been seeing the effects on inflation”

    “Inflation has eased over the past six months, and that’s very good, so I’d say our policy rate is likely at its peak for this tightening cycle”

    “the labor market is rebalancing well”

    “We’re not trying to slow the economy”

    “..inflation coming down, the committee intents to move carefully as we consider when to dial back the restrictive stance.”

    “..that doesn’t mean we wait around to see the economy tank, because it’ll be too late”

    “If we see an unexpected weakening in the labor market that would certainly weigh on cutting sooner.”

    “As you know, almost every participant on the Committee believes it will be appropriate to reduce rates. We feel like inflation is coming down. ”

    “The median participant wrote down three rate cuts this year”

    ** Breaking: Jerome Richter confirms analyst expectations of imminent rate cuts with dovish presser **

    WSJ call me up, I got this

  8. Dick says:

    I find this statement nonsensical.

    “We want to take advantage of this situation and finish the job on inflation while keeping the labor market strong.”

    Let me get this straight. The fed is going to get back to 2% with ‘drunken sailors’ spending like they have? Come on wolf. They aren’t finishing any job. They are extending and pretending, and hoping. In the meantime, it is as i said a year ago. In reality 2% is out the window in practicality.

    • Wolf Richter says:

      Look at the numbers. In 2023, inflation cooled substantially despite the strong economy. It’s hard to argue with that. And so they “want to take advantage” of that dynamic – cooling inflation despite a strong economy – by pushing down inflation further with their higher rates, while the economy is still strong. That’s what they’re saying. And that makes sense.

      The whole dynamic of the economy being so strong despite the 5.5% rate has been a surprise. That was not expected to happen. But it’s here, and they might as well take advantage of it with continued higher rates to bring inflation down all the way.

      The risk is, as Powell pointed out, that this cooling of inflation is a head fake, that it will either go back up or stabilize at a higher level. Then they would have to deal with that. And I think that risk is very real.

      • CCCB says:

        Great article.

        Powell couldnt have sid it better himself!!!

      • Gabriel says:

        Yes, inflation cooled but was that the head fake you are talking about?
        Fuel prices falling (back up again) were a great help but services are not relenting.
        It’s sort of like the housing market. It’s cooling in most places but increasing in others.

        • spencer says:

          Interest is the price of credit. The price of money is the reciprocal of the price level. Our “means-of-payment” money supply just reversed / re-accelerated after 22 months of deceleration in December. TBD.

          Dr. Daniel L. Thornton, May 12, 2022:

          “However, on March 26, 2020, the Board of Governors reduced the reserve requirement on checkable deposits to zero. This action ended the Fed’s ability to control M1.”

      • Aman says:

        Powell sort of admitted the possibility of a head fake yesterday when he said that inflation may get sticky from here on.

        Goods have been driving disinflation but they aren’t going to keep doing that forever. Things aren’t going to be free. Energy has helped too but difficult to say if that will persist.

        To me, it makes no sense to cut if the economy continues to grow at above trend, unemployment remains low and inflation remains where it is. If all of this continues long enough then one has to admit that we are in some kind of Goldilocks…but history isn’t kind to that kind of thinking. Maybe this is a new paradigm. Time will tell.

  9. Flea says:

    Who owns MEDIA open your eyes billionaires ,so it’s controlled and manipulated. We The People better wake up .Your wealth has already been stolen bwaaaaaah

    • BB says:

      Xactly Flea.

      And strong economy? by funding GDP through debt? I read something to the effect that it is taking $1.55 to create $1.00 in GDP. Isn’t that the equivalent of using a credit card to make one feel wealthy?

      In this election year J. Powell will do “whatever it takes” to ensure the current administration is not blamed for a S**TY economy.

      • Wolf Richter says:

        “I read something to the effect that it is taking $1.55 to create $1.00 in GDP.”

        No, that’s just superficial simple math. But that’s not how it works. A lot of government spending is not counted in GDP to avoid double-counting it; that portion is counted in GDP only when the recipients spend or invest this money, which could be years later or decades later, or maybe never it they buy stocks with it and lose all of it. The government spending calculus in GDP is much more complex to avoid double-counting government spending.

  10. Phoenix_Ikki says:

    Really really sick of this system in which the market and broader economy latch on and speculate on every single words from the FED as if we are all waiting for a new ten commandments to be written at every FOMC…

    Goes to show how dysfunctional of the market truly is…interest rates, FED policy…etc should matter but if everything is working against fundamentals rather than QT and ZIRP environment glue sniffing for the past decade and more I would bet there’s less read between the line drama we get now and every FOMC feels like a damn financial Superbowl..

    • Desert Rat says:

      “Really really sick of this system ”

      Me too. The obsession borders on mental illness. Actually is mental illness, not borders. The market is so dysfunctional and corrupt it’s hard to call it a market. Glad Jay gave us a reprieve, even though only temporary since wall street will never take no for an answer.

      • Pea Sea says:

        The Fed absolutely brought this on themselves when they decided to breastfeed the markets with constant forward guidance. The markets feel entitled to No Surprises Ever, and you can’t blame them when the Fed itself has explicitly made No Surprises Ever their actual working policy. They should abolish that policy.

      • Jackson Y says:

        Did you think Wall Street was going to accept the end of 15 years of low interest rates without a tantrum?

        There’s a whole generation of professional money managers who’s never seen positive real interest rates, or learning how to invest on fundamentals instead of just following the Federal Reserve.

        • Desert Rat says:

          No, I didn’t think wall street would accept without a tantrum which is why I said wall street won’t take no for an answer.

  11. WMG says:

    – Rate cuts are coming. The only question mark is “WHEN”.

    • Wolf Richter says:

      Yes. Next year?

    • Kelly Schaeffer says:

      Yep, that’s it….rate cuts are coming (eventually). When, nobody knows. (Yes, when the data says it’s good to ease – but nobody knows when that will happen).

      What we do know is that the market anticipates lower rate in the future which explains why the stock market is at all time highs.

      If no black swan, it’s likely this will be a soft landing. Once rates come down…..floodgates are open again for RE and crypto…..

  12. J-Pow!!! says:

    Would be a senseless waste of ammo right now and maybe even heat things up too much.

  13. OutWest says:

    Powell is well aware of the deceleration of the Chinese economy and its impact on the US. The Russian economy is a mess, and the US is bringing manufacturing back home out of necessity. It’s a tricky rate environment since cheep money is needed to double the size of the US industrial base in the next 10 years, ideally.

    • Apple says:

      Chinese economic problems will probably mean a cheaper Yuan and cheaper imports with less need for manufacturing in the US.

      • ru82 says:

        What cheap imports? LOL A lot of manufacturing is/has moved out of China.

        It is arriving in the U.S. via Onshoring or Mexico or India or Vietnam.

        Mexico may be a big winner here.

        • John H. says:


          “Mexico may be a big winner here.”

          Great observation. Especially in light of obvious perils of ocean shipping…

      • MM says:

        “less need for manufacturing in the US”

        The exact opposite is happening; companies are trying to reduce their reliance on China (and offshore mfgring more generally) due to supply chain & geopolitical risks.

    • yellenput says:

      fiscal stimulus is the key to inflation.

    • Ron says:

      Chinese property imploding ,but no consequences yet,remember all the economies are intertwined,thru banking and bond markets . At some point somewhere it will implode

  14. SRK says:

    Today IMHO FOMC and Powell were very clear on the messaging unlike Dec 2023. Some statements added to push back on rate cut mania was awesome.

    But I was little disappointed on 2 question/answers.
    On QT, he said they will discuss in detail in March 2024. So kind of creates a doubt. What are they talking about stopping/reducing the pace? He didn’t say stopping as such. He also said next year. So thats another confusion part.

    On subsequent question, when Evan Ryser asked if FED will wait till ON RRP amount become zero, Powell said no. He said he doesn’t think that will be the position. Some stability level. (We will wait for Wolf’s FED balance update for more precise numbers.) But still ON RRP balances are depleting pretty fast. They should hit zero or near zero as we expect them in regular times.But Powell denying taking that position creates a doubt. Isnt it?

  15. Kevy Ray says:

    Watching the pundits salivating for rate cuts is liking watching my dog when I’m eating a steak in front of her. Dog has better manners.

  16. ChS says:

    I read something earlier today that claimed the economic reports the FED relies on to make decisions, such as those provided by the BLS, are being revised more often and to greater extent than ever before. I don’t know if that’s true, but if it is, it’s going to make it very hard for the FED to make the timely data driven decisions they keep talking about. Sounds like threading a moving needle and then sticking the landing.

    • Wolf Richter says:

      That’s why they’re “not rushing” to cut. They understand that they could just be looking at a head fake.

      • ChS says:

        Under those circumstances, it hard to see their decisions being anything other than late.

        • The Struggler says:

          ChS: yup, FED always late!

          2021: looking for reasons NOT to hike (DONT MOVE)

          2024: looking for reasons NOT to cut (DONT MOVE)

          Not so easy being at the helm of the Titanic. JPow doing better than I thought.

          Still on recession watch at Wolf Street: No Landing estimated.

        • JimL says:

          Of course the FED decisions are always late. They are reactionary decisions. They hike when they see inflation and the cut when they see inflation dropping.

          By definition reactionary decisions are after the fact, i.e. late.

  17. DR_ECE_Prof_FinancialWizard says:

    He can’t be that tough and open like Wolf lest he would tank the stock market and he is happy that it is holding so well when the housing is frozen but not doing a 2008. Our wealth and tax collections need inflated assets; he can’t let the air out!

    • Wolf Richter says:

      Probably about half of this text consists of direct verbatim quotes, the rest are summaries sprinkled with some directly quoted phrases. It was just scattered chaotically over an hour’s worth of crazy Q&A, so I pulled it together and organized it to where you can actually read it.

      • A Scountjos says:

        Nicely done . market will lean into this again .

      • John H. says:


        Have you considered moonlighting as a speech-writer or press secretary?

        Best to have your thoughts in order (and a pay-scale penciled out) before you get the call from the Eccles building!

  18. Eider says:

    I listened to the press conference while working on other things. Mr. Wolf captured it well (i like the connection to The Belgariad). I’m curious about how the treasury securities will react over the next month. Day to day doesn’t phase me. I buy at auction and hold to maturity.

  19. kpl says:

    Powell said – “Inflation has eased over the past six months, and that’s very good, so I’d say our policy rate is likely at its peak for this tightening cycle, but we will need to see continuing evidence to build confidence that inflation is moving down sustainably toward our goal before we cut rates.”

    Wall street heard (what it wants to hear) – “Inflation has eased over the past six months, and that’s very good”

    and then adds its own bit to suit its narrative – “So the Fed will cut rates in March!!”

    • Wolf Richter says:

      It’s hilarious how people cling to the March rate cut, after they had to give up the January rate cut. Remember, back in Nov/Dec, the Fed was going to cut in January, LOL.

      Market expectations for the Fed’s policy rates are nearly always wrong. There are lots of funny charts out there about this, showing market expectations for the federal funds rate, and actual Fed policy rates. I’ve posted similar charts before. I got this in my email yesterday (not sure where the chart originally came from, but I got via forward from StoneX:

  20. KGC says:

    What I don’t see is the possibility of raising rates in inflation “stabilizes” above 2%. That bothers me, because it raises the specter of the FED accepting an even greater devaluation of the dollar than “normal”.

  21. The Moon Is Flat says:

    All these people “salivating for the first rate cut” may be in for a rude awakening. The latest rip your face off rally in equities is due to people aggressively front running these 3 (or 6+) magical potential rate cuts. When they come – and they eventually will – the boat will be so crowded on one side of the trade that the whole thing may tip over. That’s my best guess. A blow off top rally into this summer in anticipation of rate cut nirvana and when Mr Powell finally utters those magical words: look out below.

    • Steria75 says:

      Thoughtful comment.

      I would say people want to sell at the top and then enjoy the fruits of their speculation. So when it’s finally time to cut, it’ll trigger selling the news.

      It takes a lot more bad news to derail the market in 2024 than it did in 2004. Something catastrophic would do the trick, but if we’re lucky enough to escape that, then just Jerome cutting rates might just be the spark.

  22. JeffD says:

    Excellent reading between the lines!

    Separate comment: I feel like there is a hint of a loose global coordinated effort among developed country Central Banks to stabilize the global financial system. They all acted with groupthink in their pandemic response, and since they all “blew it” they seem to be communicating/coordinating more than usual to crawl out of it together, without making waves.

    • VintageVNvet says:

      So several ”active/declared wars, along with many other war like situations though out the world don’t count as ”making waves” JD?
      Glad to know that, as we have always understood war as a last resort, instead of war as normal, maybe as SNAFU…

    • WB says:

      Yes, a global coordinated (printing) effort…

      This time is different in so much as hyperinflation will be a global, not regional, phenomena, like it was in the early 1900s. Add to that the resources and energy required to maintain a decent standard of living for 8 billion people and things are going to get real interesting. There was less the 1 billion prior to WWI.

      • VintageVNvet says:

        Good one WB,
        As a now apparently certified elder one, who can remember when the ”24 inch Sandwich Loaf” was a so called loss leader for 10 cents, limit of ten loaves or loafs per current spelling.
        So at that point in time when I was working at the only ”supermarket” in Collier County, FL, that had approx. 15Kpeople in approx. 2000 SQUARE MILES of dirt, plus a couple hundreds more including water covered,,,
        Any of the Many who were buying that bread could live on just about $5 per week of food, and either crash on the couch of friends and family or on dirt if none of those, and live to get another job.
        Gonna happen again, very probably,,, gonna happen again with same possibility of staying alive with working a few hours per week, possibly exactly as those days, not so likely.

      • JimL says:

        I know you really, really, really want hyperinflation to come about, but where is this collective hyperinflation going to come from? Right now the economies with the most influence globally are not trending towards hyperinflation at all.

        Also, if all of the world’s currencies suffer a large loss of buying power, who gains?

  23. BS ini says:

    Lots of fun reading this take on Powell . Thanks for the opportunity to read the colorful commentary.

  24. Debt-Free-Bubba says:

    Howdy Folks. My First Cousin Bubba Says. Greenspan Part 2 returns in 2024. Inflation reaccelerates in 2025. Prepare for a wild ride, find a leisure suit and learn to disco too……. Stay Alive and enjoy life…..

    • WB says:

      Right, what was the debt:GDP in the 70’s again?

      The historic average interest for the ten-year bond is somewhere between 5.5-6.0%. Volcker took it to 20% to slay inflation.

      Bring it!

      Yes, enjoy life, time is the most valuable asset after all.

      • Debt-Free-Bubba says:

        Howdy WB. I checked with my Cousin Bubba and he said they make up the numbers as they go along. He does not trust them or the numbers they put out. He is playing Saturday Night Fever over and over again and says the 70s 80s shall return. He thinks a decade or more for this to play out. The End

        • WB says:

          Sweet! I guess I better pick up more of the Altria Group then. Drinking, smoking, cocaine, all the usual curses of the working class should do well going forward…

        • Debt-Free-Bubba says:

          Howdy WB YEP. Whatever floats a Drunken Sailors Boat

      • spencer says:

        No, Volcker imposed reserve requirements on NOW accounts in April 1981

      • John H. says:


        “… enjoy life, time is the most valuable asset after all.” Wise sentiment!

        Related but different:
        “What’s the use of happiness? It can’t buy you money.”
        — Henny Youngman, irreverent, as always!

  25. WB says:

    LOL! Excellent Wolf. Although you forgot the bit about the cantillon effect. Jay Pow and the people at the Fed and the member banks are NOT stupid. They know that folks who got the ZIRP money first were able to profit handsomely and grow their wealth 300-500%. Even 25% inflation won’t impact their lives. As for everyone else, not so much. The feudal system in now back in full view.

    Any idea when all the CRE writedowns will have an impact or do you think the problem in the CRE market are “contained”? How much of the commercial real estate is owned by entities outside of the U.S.?

  26. tangojennifer says:

    I don’t know why I even read any “mass” media articles about economics as this is what they were saying about yesterday:

    “But some relief could be on the way: The Fed could start cutting interest rates next month. Timber.” – TheSkimm

    “The Federal Reserve holds interest rates steady but signals rate cuts may be coming” – headline for NPR article heard on All Things Considered

    TBF, the NPR article did clarify that it was unlikely in March later in the article, but only after saying rate cuts could be coming soon several times. I actually read this article prior to yours, Wolf, and when I read yours, I felt like NPR had received nearly opposite info from the FOMC meeting.

    Then, I saw the 10 year drop 7 basis points from its already artificially low position. *face palm*

    • WB says:

      Indeed, who the f&%k is lending uncle sugar money for ten years at less than 4%?!?!?!?

      • VintageVNvet says:

        Definitely NOT WE,,, in this case the Family WE.
        Have actually made some progress with the rest of the current family WE, and just hope and plan to proceed accordingly.
        Many thanks to the Wolfster, and will add that in spite of ”late”, due to SO many grands,, contributions will proceed.
        Mostly $$$ waiting to see, and please forgive me, IF yields of T bonds, etc., follow ratios of ’80s debt interest, as they should in any kind of fair market.

  27. Debt-Free-Bubba says:

    Howdy Youngins. Do not even believe this will be over in a few years time. What they did will take decades to undo. If it is even possible…….

  28. TrBond says:

    Good review by Wolf.
    And Wolf has been warning for some time that the Fed watchers and market participants are overplaying their view of the Fed.

    I think Powell is much better Fed Chair than the Academicians Bernanke/Yellen .
    Not as wedded to models, more aware of what he isn’t sure of

    • Debt-Free-Bubba says:

      Howdy TrBond. Powell caved and lowered rates and went back to ZIRP before.

    • The Real Tony says:

      Bernanke was the worst in all of America’s history.

    • spencer says:

      Powell is a Keynesian economist. He doesn’t know the difference between money and mud pie.

  29. SoCalBeachDude says:

    Bloiomberg: A $560 Billion Property Warning Hits Banks From NY to Tokyo

    New York Community Bancorp’s decisions to slash its dividend and stockpile reserves sent its stock down a record 38% and dragged the KBW Regional Banking Index to its worst day since the collapse of Silicon Valley Bank last March. Tokyo-based Aozora Bank plunged more than 20% after warning of a loss tied to investments in US commercial property. In Europe, Deutsche Bank AG more than quadrupled its US real estate loss provisions to €123 million ($133 million) in the fourth quarter from a year earlier.

    The concern reflects the ongoing slide in commercial property values coupled with the difficulty predicting which specific loans might unravel. Setting that stage is a pandemic-induced shift to remote work and a rapid run-up in interest rates, which have made it more expensive for strained borrowers to refinance. Billionaire investor Barry Sternlicht warned this week that the office market is headed for more than $1 trillion in losses.

  30. BackRoad says:

    Yesterday and today is the problem with trying to time the long UST bond market. In one or two days you have a massive rally. Then you think to yourself “it’s too late now, too much risk jumping in after this big rally”. And it keeps rallying, and you end up missing the trade.

    • MM says:

      Its only a risky trade if you’re buying things you can’t hold till maturity.

      I don’t see how long duration paper is a buy at all for individual investors right now (except some callable agency bonds with coupons in the upper 5s)

  31. Desert Dweller says:

    Let’s face it, Wall Street is addicted to cheap money. They are like crack addicts who need a fix. Meanwhile, the economy is doing fine, inflation is coming down, and employment is still strong. There is absolutely no need for the Fed to do anything other than monitor the situation.

    • WB says:

      It’s not the Fed’s mandate to do anything at this point. adding $1.5 in new DEBT to get $1.0 in growth is THE problem.

      It’s now up to CONgress to balance the f&%king budget!

    • spencer says:

      Powell needs to continue with QT. The FED needs to find Lowest Comfortable Level of Reserves (“LCLoR”). And that will be tricky with the mal-distribution of interbank demand deposits.

  32. DanR says:

    Would appreciate any comments on this general observation. From history I see that bondholders (especially long bond holders) were burned badly in the inflation ramp-up in late 1960s through early 1980s. It appears that they and the Fed kept interest rates higher than inflation rate in 1980s-1990s as payback for this experience.

    I am not sure if above pattern happens in other developed economies and other times in history.

    Turning to today, I think bondholders and creditors would want to keep rates high to compensate for recent inflation. Fed appears to be on board for now.

    • Debt-Free-Bubba says:

      Howdy Danr Buy CDs instead?

    • spencer says:

      The “Great Inflation” was due to the monetization of time deposits and the FED’s operating procedure, the end of gated deposits, and the transition from clerical to electronic processing, i.e., the increase in the transaction’s velocity of money, e.g., the daily compounding of interest.

      The increasing availability of goods and services for consumers after WWII provided the original impetus to rising money velocity. About the time these factors had reached a plateau, a whole series of structural changes were introduced which enabled holders to minimize checking account balances.

      In the early sixties the negotiable certificate-of-deposit was introduced. Banks began to manage their liabilities, and corporations began managing (minimizing) their non-interest-bearing cash balances.

      Increased use of, and faster air traffic, speeded up the time for checks and clearing balances to be credited to the receiving banks, and the Fed further abetted the process by reducing “float” time to a maximum of two days (like “Check 21” on October 28, 2004).

      The culmination of this speeding up process came with the introduction of electronic clearing. Velocity was given a further upward push by the introduction of ATS (automatic transfer of savings) accounts. And, of course, high interest rates and high rates of inflation contributed to the publics’ desire to minimize noninterest bearing checking accounts.

    • SoCalBeachDude says:

      Federal Reserve interest rates are not high now; they are historically extremely and abnormally low.

    • MM says:

      The period you’ve described is illustrative as that was the last major bond bear market.

    • John H. says:


      Not sure if this (quote below) addresses your question, but it does point out how DEVASTATING the losses taken over the decades leading up to the 1981 rate peak were, and how lengthy the bond bear market was:

      “The greatest of all secular bear markets, which began in April of 1946, and probably ended in September 1981, carried prime long American corporate bond yield from their lowest recorded yields to their highest. The yield index rose from 2.46% to 15.49% for seasoned prime issues and up to 16.5% (industrials) and 18.0% (utilities) for high quality new issues. This was a yield increase of 1303 basis points on seasoned issues, and 1981 peak yields were more than six times greater than 1946 low yields. The great bear market lasted some thirty-five years, by far the longest duration for a bear bond market in U.S. history. If a constant maturity thirty-year 2 1/2% bond had been available throughout this second bear market of the century, its price would have declined from 101 in 1946 to 17 in 1981, or 83%. In contrast, in the first bear bond market of the century, 1899 to 1920, the same bond would have declined 35% in price. The recent bear bond market [1946-1981] seemed to have much more social and economic significance than that of all earlier bear bond markets. In all the others, bond yields stayed within the traditional band that had prevailed for centuries. This time they broke decisively out of that band.”
      — Sydney Homer and Richard Sylla, A History of Interest Rates.

      I’m confused by your statement that “bondholders …. would want to keep rates high to compensate for recent inflation.” That might be true for non-bond holders who want to buy bonds at a cheaper price, but once the bonds are purchased, the bond holders suffers as rates rise, at least on the current price of their existing holdings (e.g. SVB and other banks who built portfolios at ZIRP-era yields).

      Argentina, UK, Weimar Republic, Turkey, and Lebanon might be worth studying, but I’d start with the Homer/Sylla masterpiece quoted above.

      • Kile says:

        John H.

        I have to say, seeing a commentator quote Sydney Homer and Richard Sylla is exactly why I read and enjoy reading Wolf Street and its comments. Homer and Sylla’s A History of Interest Rates has been on my “to read” list for a while.

        Now if I can just get myself to quit reading and listening a lot of useless mass Media, I’d have more time to attack my “to read” list.

        • John H. says:


          If there’s room for another, shorter read on you list, add Elgin Groseclose’ America’s Money Machine, which chronicles the establishment and earlier development of the Fed.

          It’s a free download at Mises website. They describe the book:

          “He [Groseclose] shows that at no time in its history has the Fed actually achieved what it promised: low inflation, economic stability, stable growth, reliable regulation of the banking system. Groseclose goes further to show that the Fed has generated unrelenting cycles and inflation and been the major fuel for the growth of government — politicizing the whole of American economic life.”

          It’s a short and forgotten masterpiece…


      • Kile says:

        John H.-

        Thanks much for the suggestion. Federal Reserve (and central banking) history has also been on my list! In fact, I’m just finishing Walter Bagehot by Jim Grant and I’ve recently ordered The Creature from Jeckel Island by G. Edward Griffith.

        Now if I can just get my limited brain cells to absorb more…………….

      • John H. says:


        Since you mentioned Bagehot:

        “There is a natural tendency in men to follow the example of the Government under which they live. The Government is the largest, most important, and most conspicuous entity with which the mass of any people are acquainted; its range of knowledge must always be infinitely greater than the average of their knowledge, and therefore, unless there is a conspicuous warning to the contrary, most men are inclined to think their Government right, and, when they can, to do what it does. Especially in money matters a man might fairly reason — ‘If the Government is right in trusting the Bank of England with the great balance of the nation, I cannot be wrong in trusting it with my little balance.’
        — Walter Bagehot, Lombard Street, 1914 ed., p 58

        About 17 years (and one World War) later, the BofE suspended all rights to redeem in gold…

        ‘Nuf said.

  33. Nathan Wilder says:

    He also told the people in Congress begging him to lower rates to make housing more affordable that that wasn’t the Fed’s job. Control inflation, control unemployment, that’s it.

    The Fed is the only adult in the room at this point. (Which is a sad commentary considering they’re partially to blame for this inflation.) But at least they’re trying to clean up the mess. Congress needs to do their own job of actually legislating instead of spending like maniacs and blaming anyone but themselves for inflation.

    • Debt-Free-Bubba says:

      Howdy Nathan. I believe all the people are the exact same in that room and have the exact same goals. What is best for US people does not even enter their thoughts.

    • Einhal says:

      I agree that that was a good statement, but he should have gone farther and called out their patent dishonesty. That lower rates doesn’t make housing more affordable. It just allows sellers to sell for the high bubble prices that they are asking for today.

      Housing is just as affordable at higher rates, it’s just that prices need to come down, and THAT’S what the idiots in Congress don’t want.

  34. Misemeout says:

    It’s hilarious they act like interest rates are restrictive with the government racking up 6% of GDP on the credit card and credit in general still expanding.

  35. Andrew Stanton says:

    The Chicago Fed NFCI shows things are far from tight:

  36. Nicely parsed! Once the Q&A went past when they might ring the pavlovian rate cut bell, the market got ugly. There is always something missing, the term “structural” changes to the economy and long-term effects of deglobalization, and perhaps a victory lap for Treasuries masterful handling of bond supply at auction (so far). Deficits are too high, sure. Data watchers should focus on employment, jobs created number, their favorite. There’s always a moment at the crap table when they change the card with the posted house limit. When that number is lower the big boys pick up their money.

  37. Bandon says:

    I’m not sure I quite understand the markets reaction to this FOMC meeting. Fedwatch had a hold policy prediction in place at 98% the day before and only a 37% probability for rate cuts in March. So for a market that already has this baked in, they sure like to panic a lot.

    • ru82 says:

      What is up with the Bond Vigilantes. 10 year treasury dropped from 4.1% yesterday to 3.82. It has risen to 3.85 as we speak. Did they not hear what JP said? That is a pretty big move in two days.

      • BackRoad says:

        Mish Shedlock had a interesting take on this. He said yields may have be up the past month because of bond market thinking the fed would cut too early, and thus re-stoke inflation. But since the Fed appears to not be cutting/easing so quick, maybe the market thinks Fed gets inflation down further? Thus the bond market “looks forward” and sees less inflation, and yields fall. This is more 2nd level type thinking.

  38. The Real Tony says:

    Rates are anything but restrictive the problem is the government bends over backwards for the down and outers. This goes against what a free enterprise economy is all about. America doesn’t need socialism to help people who have no money so rates should be raised not lowered to teach them a lesson.

  39. fred flintstone says:

    The bond market and gold market this morning are telling me that the fed is making another “transitory” mistake…..or it could be deliberate.
    Claims still under control….but…..a reasonable jump. Banks starting to announce allowance adjustments.
    UPS layoffs.
    The stock market, the junior market, as usual, has not received the word ……but Apple earnings ought to be interesting.
    So……Pins and needles.

  40. Indelible says:

    Wolf – thanks for the timely posts about the Fed/Treasury actions and the debt status…really good to know!

  41. Zaridin says:

    I’d pay real money for him to talk that openly and clearly.

    • JimL says:

      I think Powell does generally talk pretty openly and clearly when he is speaking on his own.

      Much of the problem comes when taking questions. Not because he can’t answer them, the problem is they are mostly loaded questions. They are questions designed to make the response what the questioner wants to hear.

      For example:

      Jerome Powell: I love my wife and always want the best for her and would never hurt her.

      Question #1: What would it take for you to shoot your wife?

      JP: I would never shoot my wife.

      Question #2: so if your wife went all wild eyed and started to stab your kids with a knife, would you shoot her?

      JP: I would do everything I could to restrain my wife from stabbing my kids with a knife. I would grab her and hold her back, I would only shoot her as a last resort if there was no other way to stop her.

      Question #3: So if you were 50 yards away and she had a knife to your youngest child’s throat and was going to slice it, you would shoot her because there was no other option?

      JP: I guess. If there was no other option I would have no choice other than to shoot her. I love my wife and really don’t want her to be hurt.

      Bloomberg headline: Powell says he has no other choice except to shoot his wife.

      So many people react to words out of context nowadays that it is important to not only listen to the answer to a question, but to also listen to the question itself as well as the context it is asked in.

  42. 8ticks says:

    Here in Tampa even with rates where they are my cousin the new home salesman made 9 sells last month banking 90k in commissions. He can’t move them fast enough.

    They are building on every speck of dirt they can find, houses, townhomes, car washes, storage, condos, its still on fire.

    Anecdotally just by observation Id say single family has slowed, but still selling at a fair clip.

  43. Kenny Logouts says:

    I was looking at charts last night.

    Oct 21 ish rates started to rise “a bit” to help along transitory inflation reduction.
    Then they kept coming.
    A year later in late 22, markets had accepted it and retreated in value. Tightening achieved.
    Inflation has stopped rising and base effect driven drops evident.

    Then for about 14 months we’ve had artificial ‘easing’ provided by the pivot hope/kool aid/delusion because inflation had ‘come down’

    And markets have boomed on this market-driven easing, despite being in an entrenched tightening cycle that’s not getting what is needed done.
    And all the risks out there right now with wars/conflict, debt costs, etc.

    All I can say for sure is it’s interesting to watch.

  44. danf51 says:

    It’s an election year. The administration will do all it can to stimulate the economy.

    Deficit spending is running at 500 billion per quarter. How could the economy not appear to be “doing well”.

    Does the bill come due in 2025 or will we be able to continue to get foreigners to keep buying our paper ?

    Nobody in politics cares how big the final bill is. The ONLY consideration is to postpone the final presentment for as long as possible.

    However, if it is true that big wealth oligarchs run things (?), are they really sanguine about having the unit of account in which their wealth is denominated, destroyed ?

    Isn’t it inevitable that an inflationary destruction of the unit of account, would be followed by a collapse of asset values AND the collapse of the value of “money”.

    So it would seem to me, that IF big wealth oligarchs really pull the strings (?), they would slowly be migrating behind the position that saving the currency is “important” and thus higher for longer is the preferred path if the age of free money cannot continue forever.

  45. Kevin Darville says:

    How many times did he say “confidence” tho?

  46. sally says:

    With this news, what is the likelihood that rates retrace upwards some?

  47. Desert Rat says:

    Stonks way up today. All kinds of bull sh it reasons why in the headlines from higher UE claims data to a Regional Bank crisis leading to early rate cuts. It’s crap like this that makes me wish for a collapse. I knew wallstreet wouldn’t take no for an answer.

    • Bobber says:

      With the Fed forcing 2% inflation, plus additional inflation overages that result from crisis management, it’s an escalator that continually moves up. And it’s very hard to go back down.

    • Pea Sea says:

      Happy days are here again (and have been since the revival of the Fed Put about a year ago).

  48. john bergin says:

    I recommend Powell just hires Wolf and give all of us 4 hours of our lives back trying to figure out all his double talk. It would be shorter, to the point and honest-something painfully missing. However, i would pay big bucks to see Wolf yell at the media during the q&a for their stupid questions!

    • Wolf Richter says:

      I would insist on being equipment with a special Taser with which to ZZZZZZAPPPPP reporters that ask stupid, repetitive, leading, manipulative, or convoluted questions.

  49. radman says:

    You’d get about 1 hour into the 4 hour presser before the worldwide blackout

  50. OutsideTheBox says:

    Thanks for the article Wolf.

    What is truly amazing is a Fed / Powell artice without a rage powered foaming at the mouth primal scream from Depth Charge.

    He must have taken ill. Best wishes fora speedy recovery.

  51. Cookdoggie says:

    “There are risks that would cause us to go slower, for example, stronger inflation. And there are risks that would cause us to go faster or sooner, for example, a weakening in the labor market”

    What happens if both occur at the same time? Which one do you prioritize?

Comments are closed.