Episode summary
Instant Reaction: Jay Powell on the Fed Decision | Bloomberg Intelligence
Bloomberg Intelligence
· · Hosts: Tom Keene, Jonathan Ferro, Paul Sweeney
Summary
Federal Reserve Chair Jay Powell left rates unchanged after three consecutive cuts, and the discussion centered on a more cautious Fed that now sees less pressure from both inflation and the labor market. The host and guests read Powell’s press conference as a deliberate attempt to avoid politics and keep attention on data, with the committee’s recent shift suggesting the Fed is comfortable pausing while growth improves and inflation stays sticky near 3%.
The guests argued that this may be the last cut under Powell, and possibly the last cut for a while, because the economy looks firmer than it did in December. They pointed to stronger consumer spending, the effect of tax refunds, and the market’s resilience in stocks and bonds. At the same time, they said the Fed is unlikely to raise rates even if inflation and growth stay firm, because policy is still asymmetric toward waiting or cutting.
A second theme was how AI, wealth effects, and a K-shaped economy are complicating the outlook. One guest argued that tech capex and rising asset prices are supporting consumption and may help keep the U.S. economy growing, but they also widen gaps and could eventually lift real rates, inflation risk premia, and term premiums.
Key takeaways
- The guests think Powell’s decision to hold rates likely marks the end of the cutting cycle under his chairmanship.
- A guest said the Fed is more comfortable now because both labor-market risk and inflation risk have diminished a bit.
- Jeffrey Rosenberg argued that AI-driven capex and the wealth effect are now central to U.S. growth and consumption.
- Stephanie Roth said inflation may stay around 3% for a while, which would make near-term cuts difficult.
- The host and guests said the Fed is unlikely to hike even if growth and inflation reaccelerate, showing an asymmetric reaction function.
Notable quotes
“committee pretty broadly for for for holding today that we still have some tension between employment and inflation, but it's less than it was”
“the data is going to be better. it will improve. The chairman saying overall it's a stronger forecast than in December”
“we're likely to have some some firm goods prices in the next couple of months”
“the removal of the balance of risks from the labor market assessment”
How the episode opens
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The beginning of a walk into the sunset for the chairman of the Federal Reserve. Jay Pal only has two more of these meetings on the calendar as the chairman of the world's most important central bank. For the equity market, on the S&P 500, still close to all-time highs on the S&P on the NASDAQ 100 up by 0.5.
In the bond market on twos, tens, and 30s, we look like this. Yields just about unchanged. your 10year 425, your 2-year 358.
Journalists did their best to make this one interesting. Chairman Pal was determined to make it boring. Take a listen to what the chairman had to say.
Some people did want to cut and and and desissented, but committee pretty broadly for for for holding today that we still have some tension between employment and inflation, but it's less than it was. I think that the upside risks to inflation and the downside risks to risks have probably both diminished a bit. So u you know we'll be looking at that.
There are different views on the committee and you know we'll find our way forward as the data evolve.
TK just my takeaway just my observation towards the end it felt like a man who was looking forward to retiring and stepping down. — You know there was a gold question. It's great he doesn't have Krueger in the drawer.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed decision
- federal funds rate
- fomc dissent
- us economy outlook
Companies and tickers mentioned
- Bloomberg
Watch the episode
Watch “Instant Reaction: Jay Powell on the Fed Decision | Bloomberg Intelligence” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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