In Short: Powell, in debut, supports bull case


In his first appearance before Congress as Fed Chair, Jerome Powell today acknowledged the improvement in economic growth and steady build in inflation that we’ve been talking about. It caused a few ripples, with futures markets starting to price in a potential fourth rate hike this year. But there was no evidence that the Fed is worried about a sharp pickup in prices, Powell’s key phrase being the policy-setting FOMC “will continue to strike a balance between avoiding an overheated economy and bringing PCE price inflation to 2% on a sustained basis.” This tells us the Fed still sees risks of inflation being too low as equal to risks of it being too high, keeping the central bank on a gradual rate-hike path (three, maybe four this year) that’s already built into market expectations. It’s also a course that’s consistent with our thesis, that neither inflation nor rate hikes are likely to be aggressive enough to threaten the bull market in equities anytime soon. We’ll keep you posted if that view starts to change.