Powell noted that the long-end of real yields has increased substantially and are now in positive territory, which aids in tightening financial conditions (the real 10y Treasury yield has increased by a record amount since March-more than during 2013's taper tantrum and 2008's financial crisis).

However, he said the UMich long-term inflation expectations jump from 3.0% to 3.3% last Friday, was 'eye catching.'

With regard to forward-looking inflation expectations, Powell said the Fed looks at a broad range of measures and that they continue to show high short-term inflation, but sharply lower inflation longer-term.

He did, however, stress that 75bps will not be 'common.'

Powell ended his formal remarks by noting that there could be 'further surprises in store' and that 75bps hikes should not be ruled out going forward, but that decisions will be made meeting-to-meeting.

Powell reiterated that quantitative tightening (QT) plays an 'important role' in tighter monetary policy.

FOMC members how have unemployment rate forecasts 'noticeably above' where they were in March (but are most likely still too low).

Powell noted that job growth is slowing, but remains 'robust,' even though overall growth forecasts were lowered by Fed officials.

The number of Fed members who see the risk to their PCE (inflation) forecasts are to the upside remain at the record of 16, with only two officials believing the risk is balanced.

2 Longer-run projections for core PCE inflation are not collected.Īs usual, this report will cover the first 30-40 minutes of Fed Chair Jerome Powell's press conference. When the number of projections is even, the median is the average of the two middle projections.

1 For each period, the median is the middle projection when the projections are arranged from lowest to highest. The projections for the federal funds rate are the value of the midpoint of the projected appropriate target range for the federal funds rate or the projected appropriate target level for the federal funds rate at the end of the specified calendar year or over the longer run. Longer-run projections represent each participant's assessment of the rate to which each variable would be expected to converge under appropriate monetary policy and in the absence of further shocks to the economy. Each participant's projections are based on his or her assessment of appropriate monetary policy. Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated. PCE inflation and core PCE inflation are the percentage rates of change in, respectively, the price index for personal consumption expenditures (PCE) and the price index for PCE excluding food and energy. Note: Projections of change in real gross domestic product (GDP) and projections for both measures of inflation are percent changes from the fourth quarter of the previous year to the fourth quarter of the year indicated. As shown below, inflation is still expected to come down significantly in 2023, but from 5.2% this year (instead of 4.3% in March's SEP) to 2.6% next year (instead of 2.7% in March's SEP). It expects real GDP growth to be 1.7% this year and next year, down from 2.8% and 2.2%, respectively, in the March SEP. As shown below, the Fed now expects the unemployment rate to increase from 3.7% at the end of this year, to 4.1% in 2024. We continue to believe a recession is more likely than a soft landing. The Fed's projections still suggest a soft landing, but a much bumpier one. The summary of economic projections (SEP) were released, as they are at every March, June, September, and December FOMC meeting. There were a few significant adjustments to the accompanying FOMC statement, including a new sentence that says the Federal Reserve (Fed) is 'strongly committed to returning inflation to its 2% objective ' while simultaneously eliminating the prior language about expecting 'inflation to return to its 2% objective and the labor market to remain strong.' Although the opening line in the statement noted that 'economic activity appears to have picked up after edging down in the first quarter,' it's worth noting that just today, the Atlanta Fed's GDPNow forecast for second quarter real gross domestic product (GDP) fell from an anemic 0.9% to no-growth-now-expected (0.0%). Environmental, Social and Governance (ESG) Investing.Bond Funds, Bond ETFs, and Preferred Securities.ADRs, Foreign Ordinaries & Canadian Stocks.Environmental, Social and Governance (ESG) ETFs.

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