You already know the line from Friday's J-Hole: "the time has come for policy to adjust". After reading the speech again, I'm not quite sure if one of the takeaways is supposed to be that inflation was always transitory after all. Hard to argue with "transitory", I mean biologically I think our cells are constantly changing so we're all transitory at some level. The speech was heavy on disruptions in supply due to Covid and Russia-Ukraine, but seemed short on discussing any of the factors leading to increased demand besides pent-up pandemic demand. No discussion of the wall of fiscal stimulus that helped fund that spending.
I guess the second lesson from Powell comes from this line: "An important takeaway from recent experience is that anchored inflation expectations, reinforced by vigorous central bank actions, can facilitate disinflation without the need for slack.". I read this as Central Bank credibility with rational expectations means you don't need to raise interest rates above the rate of inflation to bring inflation down (even though they did). That wasn't always central bank orthodoxy, but seems to be true of the recent thinking.
Anyway, go read the J-Hole papers, they might be more interesting than Powell.
Yields start the post J-Hole week and the current PCE week at near lows of the year with the 2Y at 3.92% and the 10Y at 3.80%. Stocks like low rates, at least for now. And why not like low rates? You get to discount cash flows back at lower rates leading to higher values today. That's all good, unless the reason for low rates should cause you to doubt your forecasted future cash flows.
Attention turns back to the Middle East with a major clash of missiles between Israel and Hezbollah.
XTOD: A question for people out there. Do you believe that a sufficiently restrictive monetary and fiscal policy could have kept inflation near target in light of the shocks affecting the global economy? If your answer is yes, then it was policy that permitted the inflation. Note, Admitting this does not imply that a non-inflationary set of policies should have been adopted. Flexible inflation targeting permits such an outcome in some circumstances.
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