Jerome Powell’s statements paint a picture of a Federal Reserve cautiously navigating treacherous waters. While the full consequences of their tightening measures are yet to be fully felt, they are signaling an even more hawkish stance by revising their dotplot from 4.6% to 5.1% for 2024. Powell’s words further underscore that a soft landing for the economy isn’t their primary expectation, suggesting an air of uncertainty.
What adds to the unease is Powell’s repeated emphasis on the Fed’s commitment to reducing its balance sheet. This move, coupled with their readiness to raise rates further “if appropriate,” is seen by many as a risky game.
In fact, monetary policy is currently at its tightest in recent memory, leaving many to wonder if we’re reaching a breaking point. The potential ramifications of this continued tightening are looming large, and the Fed’s actions are akin to playing with fire in an already delicate economic environment.
The stakes are high, and as these policies persist, the concern grows that something within the financial system is bound to give way under the mounting pressure. The Fed’s delicate balancing act has the world watching anxiously, with the hope that their maneuvers do not lead to unintended consequences.
Sources:
Fed moves dotplot from 4.6% to 5.1% for '24
— Don Johnson (@DonMiami3) September 20, 2023
👀
Powell: Soft Landing Isn't Baseline Expectation –WSJ— Win Smart, CFA (@WinfieldSmart) September 20, 2023
🚨JUST IN: Jerome Powell says multiple times the FED is focussed on reducing its balance sheet.
QT here we go 🙈 pic.twitter.com/hLQU0oUzrt
— Genevieve Roch-Decter, CFA (@GRDecter) September 20, 2023
Powell: We are prepared to raise rates further, if appropriate.
— unusual_whales (@unusual_whales) September 20, 2023
The Fed is playing with fire here
Monetary policy is the tightest it has ever been
If this continues, something is bound to break pic.twitter.com/jwuCBo9Z5z
— Game of Trades (@GameofTrades_) September 20, 2023