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Fed Watching: Powell’s Speech to the Economic Club of New York

Fed Chairman Powell delivered a speech titled The Federal Reserve’s Framework for Monitoring Financial Stability to the Economic Club of New York this afternoon. The bulk of the speech addressed topics related to financial stability but Powell made a remark about the fed funds rate being “just below the broad range” of estimates of neutral, triggering a sharp rally in the equity market and in the front end of the Treasury market. In a Macro Quick Hit we published earlier this week we concluded “we would be surprised if there is any indication [in speeches by either Fed Vice Chairman Clarida or Powell] that monetary policy normalization is on a materially different path than what was signaled in the September dot plot.” The market is certainly trading as though our assessment was wrong and there is a Powell Put. One test of both our view and that of markets will be Powell’s testimony before the Joint Economic Committee of Congress a week from today. The more important test will be the updated SEPs and Powell’s press conference on December 19.