In his first Congressional testimony as Fed Chairman Jerome Powell didn’t surprise as he was measured and succinct in presenting a more market-based approach to monetary policy. The equity, currency, precious metals and debt markets were all in sell mode as the prepared statement gave rise to a renewed sense that the FED will lean toward FOUR rate hikes in 2018. The key paragraph was:
“In gauging the appropriate path for monetary policy over the next few years, the FOMC will continue to strike a balance between avoiding an OVERHEATED [emphasis mine] economy and bringing PCE price inflation to 2 percent on a sustained basis. While many factors shape the economic outlook, some of the headwinds the U.S. economy faced in previous years have turned into tailwinds: In particular, fiscal policy has become more stimulative and foreign demand for U.S. exports is on a firmer trajectory. Despite the recent volatility, financial conditions remain accommodative.”