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Powell's Monetary Balancing Act: Treading Lightly on Uncertain Ground

U.S. Federal Reserve Chairman Jerome Powell on Thursday gave a speech at the Economic Club of New York. Powell said that given the uncertainties and risks facing the economy and the degree of tightening that has already been done, the Fed will "proceed with caution," suggesting that monetary policymakers are in no rush to pursue tighter policy. Like some of his colleagues, Powell acknowledged that the recent rise in bond yields may force the Fed not to take action. The Fed chairman also stated that geopolitical tensions are very high which poses a significant risk to global economic activity. However, additional evidence of strong economic growth could justify further rate hikes, so the Fed is keeping all options on the table. Powell noted that monetary policy is not "too tight" at this time. The odds of an additional rate hike in the next three meetings declined after Powell's comments, falling from 54% on Wednesday to levels of 33% on Friday morning.


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