For the first time I can ever remember, Powell said in his prepared remarks that a cut in December “is far from a foregone conclusion.”
Normally, he might tip his hand during the Q&A, but this was scripted. He must be trying to rein in expectations in case they don’t cut. Powell would not have said that if he didn’t believe that was a real possibility.
That doesn’t mean they won’t cut, just that the market is out in front of its skis.
Treasury yields jumped across the curve about 8-10bps. Futures markets pushed a December cut down from 92% to 63%.
In the absence of data, Powell did say he thinks, “Core PCE, not including tariffs, is around 2.3% or 2.4%, not that far from 2%.” That’s important because it suggests he’s not losing sleep over inflation.
Powell also noted, “a zero job creation equilibrium is a curious balance.” Hey Gemini…oh right…he did add, “We do not see the weakness in the job market accelerating…but job creation is very low.”
If I’ve said it once, I’ve said it a thousand times. Jobs, not inflation, will dictate Fed decisions next year.
You tell me what will happen with the labor market and I’ll tell you what the Fed will do.
“Hey Gemini, how will the labor market do next year?”