Joshua Jamner

Joshua Jamner, Director, Investment Strategy Analyst at ClearBridge Investments says “Powell struck a clearly dovish tone during the FOMC press conference which sparked a rally in risk assets as many investors were positioned for and fearful of a more hawkish bent after a string of hot inflation prints so far this year.

“Powell stated that the Fed was “prepared” to cut rates “if the labor market weakens”, while hinting repeatedly at a higher bar for a rate hike and that it was “unlikely the next move is a hike” while reiterating the view that monetary policy is sufficiently restrictive to bring inflation back to the 2% target over time.

“This leaves the Fed in wait and see mode after inflation has come in higher than they expected so far in 2024, meaning it will take “longer than previously expected to gain confidence” that inflation is on track to return to 2%, which has been the barometer Powell outlined the committee is looking for in order to cut rates. Simply put, higher for longer is alive and well.

“Powell pointed to lags associated with shelter inflation, stable inflation expectations, and easing wage gains (along with the potential for further supply-side improvements) as reasons to believe that inflation will return to target over time, which reinforces why the Fed doesn’t seem to be in a hurry to hike despite the recent pickup in inflation readings.”

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