Some bucketing of the Fed chair comments.

Rate Cuts & Monetary Policy

Can’t make a projection now, have to wait until June.
Will have to see how things play out.
Not at all clear what appropriate monetary policy response would be.
Time to wait before adjusting policy.
There are cases in which rate cuts would be appropriate this year, and also cases where rate cuts would not be appropriate.
I can’t confidently say we know the appropriate rate path.
President’s calls for rate cuts don’t affect our job at all.
Trump calling for rate cuts doesn’t affect Fed’s job at all.
Until they know more, they can wait and see; everyone on committee supported waiting.

Tariffs & Trade Uncertainty

Fed does not yet see big economic effects in the data yet from tariffs; people are worried but the shock has not hit yet.
A great deal of uncertainty about tariffs.
We do not know yet as there is so much uncertainty over tariffs.
If large increases in tariffs as announced are sustained, will see higher inflation, lower employment.
Avoiding persistent inflation will depend on size, timing of tariffs, and inflation expectations.
If nothing happens to alleviate those concerns, would expect that to show up in hard data in weeks and months.
Watching extremely carefully, does not see much evidence in actual data of slowdown in the economy.
Says they are now in a new phase where administration is beginning trade talks; has potential to change picture materially or not.
Big spike in imports to beat tariffs should reverse in Q2; likely net exports to have large positive contribution to GDP.
- Final sales to private domestic buyers were likely flattered by a bit of front running.

Supply Chains

Fed does not have tools to address supply chain issues, can be more or less supportive of demand; that is an inefficient way to address supply chain issues.

Consumer Sentiment & Soft Data

Not dismissing soft data, the link between consumer sentiment and demand in recent years was weak; this is an outsized change in sentiment through.

Inflation & Price Stability

Have inflation above target, with expectation for upward pressure.
Last fall, what Fed did, if anything, was a little late, not pre-emptive.
Without price stability cannot achieve strong labor conditions.
Aim to keep inflation expectations anchored.
Underlying inflation picture is good, now running a bit above 2% with decent readings in housing and non-housing services.

Employment & Dual Mandate

If we see higher inflation, higher unemployment, Fed will not see further progress toward goals next year.
Haven’t faced question of two goals in tension in a long time, have to keep it in their thinking for now.
If dual mandate goals are in tension, consider distance from goal, time to close gaps.

Labor Market & Data Dependency

Will use a combination of forecasts and data.
It is too early to know.
This policy is in a good place until they get more data to determine which way to go.
Need to see more data.
Right thing to do is await further clarity.
No hurry, can be patient.
Let things evolve and become clearer.

Financial Conditions & Past Policy

We didn’t want sharp tightening of financial conditions when economy was vulnerable.
QE wasn’t beyond the confines of our mandate.
Could have explained it better.
My gut tells me that uncertainty is extremely elevated.
Downside risks have increased.
Risks of higher unemployment and higher inflation have risen, but not yet in the data.

General Economic Outlook

Policy is moderately restrictive.
Economy is resilient, in good shape.
Policy is in a very good place.
Based on survey data, businesses and households are very broadly concerned and postponing decisions.

This article was written by Greg Michalowski at www.forexlive.com.