Sounding a bit like Winston Churchill, Chair Powell says the war on inflation isn't over and that "we must keep at it until the job is done". While the economy is slowing, it still shows "strong underlying momentum" and labour markets remain very strong.
There was no hint that the Chair fears the risk of over tightening policy, as was suggested in the minutes of the last meeting. Nor is he even thinking about thinking about reversing course on rates. Reducing inflation will “require maintaining a restrictive policy stance for some time".
Dashing market hopes of rate cuts next year, Powell affirmed that it's onward and upwards for the fed funds rate for now. We continue to look for a 50-bp hike on the 21st and rates ultimately peaking in the 3.50%-to-3.75% range, which should be "sufficiently restrictive" to cool demand and gradually lower inflation without tipping the economy into a deep downturn.
- BMO Capital Markets
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