1. Rate hike
No decision yet, even though the Fed plans to raise rates in 2022. Fed will discuss in the March meeting whether to raise the rate.
2. Maximum employment
There is room to raise the rate, without hurting maximum employment. The Fed believes that this is a very strong labor market.
3. When and how to shrink the holding the balance sheet
There is no conclusion at this moment. Note that, Fed will not reduce the balance sheet before raising the rate. That is, Fed will raise the rate first to see how it goes, before reducing the balance sheet.
In the next meeting, they will have more discussion. There may be two meetings before reducing the balance sheet.
4. Real market vs. financial condition(market)
The market has priced the rate increase. Powell believed that financial stability is manageable. That is, stock market is not his major concern.
4. Powell’s subjective perception of inflation as of today
Powell feels that the inflation as of now is worse than in December.
My Take Away:
At this moment, Powell is not sure how the economy will turn out in the next few months, even thouth he feels that inflaction would be high. However, Jan. CPI data is still not yet available til Feb. 10 8:30 AM. I believe investors need to pay close attention to this CPI release. Fed will have the next meeting on March 16, and obviously Jan. and Feb. CPI data will be out by March 16, which can provide Fed some information to make further decisions (mainly, whether to increase the rate? how much of the increase?)