POWELL'S LAST FOMC PRESS CONFERENCE. WHAT SHOULD WE LISTEN TO

Tonight will be the last press conference of Powell as Chairman of the Fed. On the morning of the same American East time, the Senate Banking Commission voted on the nomination of his successor, Kevin Walsh. Walsh is likely to have a Banking Commission pass before his predecessor enters the press room。

THE INTEREST RATE IS PROBABLY NOT MOVING, AND THE MARKET IS ALMOST LOCKED IN BETWEEN 3.5% AND 3.75% OF THIS ZONE, WHICH WILL BE THE THIRD CONSECUTIVE PAUSE IN 2026. APRIL IS NOT A SEP MEETING. FOMC PUBLISHES ECONOMIC FORECASTS AND DOT-LINE MAPS ONLY FOUR TIMES A YEAR, AND APRIL IS NOT ONE OF THEM. THERE ARE NO NUMBERS FOR TONIGHT。

So it's not about interest rates, it's about three things that are already happening, but not being tied up。

He wants to relax, but he doesn't have a loose screw

POWELL LEFT A MESSAGE THAT MANY PEOPLE DIDN'T NOTICE AT THE LAUNCH ON MARCH 18TH. JOURNALISTS ASKED WHETHER FOMC WAS CONSIDERING CHANGING THE FORMAT OR COMMUNICATION OF THE SUMMARY OF ECONOMIC PROJECTIONS. POWELL REPLIED: “WE HAVE LOOKED CLOSELY AT MANY ASPECTS OF THE SEP AND THE COMMUNICATION FRAMEWORK, BUT NONE OF THEM HAS RECEIVED BROAD SUPPORT FROM THE COMMISSION. I HAVE SOMETHING I WANT TO DO, BUT THEY HAVE NOT RECEIVED ENOUGH SUPPORT."

IN 2019, POWELL DECIDED TO EXTEND THE FEDERAL RESERVE PRESS CONFERENCE FROM FOUR TO EIGHT PER YEAR. EVERY TIME A MEETING IS OVER, THE PRESIDENT FACES A JOURNALIST THAT AFTERNOON. HE WANTS GREATER TRANSPARENCY TO MAKE THE FED’S POLICY PATH MORE PREDICTABLE. SINCE THEN, EACH LAUNCH HAS BECOME A RITUAL OF GLOBAL CAPITAL MARKETS. ANALYSTS READ HIS LANGUAGE WORD FOR WORD, HEDGE FUNDS ADJUSTED THEIR POSITIONS TO HIS TONE, AND EMERGING-MARKET CENTRAL BANKS DECIDED ON THE PACE OF THEIR POLICIES BASED ON HIS HINTS. THE SYSTEM WORKED FOR SEVEN YEARS。

But the round of inflation in 2021 and 2022 turned the logic of the system upside down。

POWELL REPEATEDLY SAID "INFLATION IS TEMPORARY" IN THE YEAR BEFORE CPI GOT OUT OF CONTROL. THEN THE CPI BURST TO 9.1% IN JUNE 2022, THE HIGHEST IN 40 YEARS. POWELL'S WORDS WERE COMPLETELY OVERTURNED BY THE PRICES OF THE YEAR. THE GREATER THE TRANSPARENCY AND INTERPRETATION, THE GREATER THE CREDIBILITY OF PERJURY。

This was followed by his own restraint. During the ensuing launch, he increasingly relied on pre-set briefing materials, and improvise answers became shorter. Words that had allowed the market to re-engineer have gradually become a few words. It's not retreating. He himself started the era of words, and so much was wrong. The more we talk about it, the less we talk about it。

On March 18, he admitted, "something he wanted to do," in the direction of breaking down the machine. Less forward-looking, more immediate, to allow policy implementation to stabilize markets rather than advance policy advice。

In theory, he has another chance. Tonight is his last launch as President, and he can try again. For example, reducing the weight of forward guidance in the opening remarks or suggesting a future reduction in the frequency of meetings after each meeting. This does not require a vote by the Committee, but only a few words from the podium. But there is a price to this move: it will be interpreted as an initiative to pave the way for the no-forward direction of his successor, Walsh。

That's the first thing to hear tonight. Powell won't unload the first screw in his own house。

There's a ceasefire. There's still inflation

IN MARCH, THE CPI INCREASED BY 3.3 PER CENT OVER THE SAME PERIOD, UP BY NEARLY 1 PERCENTAGE POINT FROM 2.4 PER CENT IN FEBRUARY. GASOLINE ROSE BY 21.2 PER CENT A MONTH, THE LARGEST SINGLE-MONTH INCREASE IN NEARLY FOUR YEARS. ONE GALLON OF GASOLINE ROSE FROM $2.94 BEFORE THE IRANIAN WAR TO $4.12。

By the time this data was released on April 10th, the US-Iraq Ceasefire Agreement was in force. Energy prices have fallen most of the time since April. If the Fed is faced with an external shock, then March should be the peak。

THE PROBLEM IS THE US BANK'S PREDICTION THAT INFLATION WILL NOT FALL AFTER THE CEASEFIRE. AMERICAN BANKS USE A CLEAR WORD, "TYPICALLY STAGNATING MARKET ENVIRONMENT." THE INFLATION PROJECTION FOR 2026 WAS THEN REVISED UPWARDS FROM 2.8 PER CENT TO 3.6 PER CENT, AND THE GROWTH PROJECTION DOWNWARDS TO 2.3 PER CENT, CUTTING DOWN 50 BASIS POINTS AND SETTING THE OIL PRICE BASELINE AT $100 PER BARREL. THE CORE CPI PATH IN THE MODEL IS Q2 GOING TO 3.2% AND BACK TO 2.8% AT THE END OF THE YEAR。

THE WALL STREET JOURNAL POINTS OUT A DETAIL AFTER APRIL ISM MANUFACTURING DATA, AND IN APRIL ISM DATA, PRICES ARE ACCELERATING, BUT NEW ORDERS AND JOBS ARE IN THE SHRINKING ZONE. WHEN THE ROUND OF INFLATION BEGAN IN 2021, THE THREE SUB-REGIONS WERE EXPANDING, AND PRICE INCREASES WERE ACCOMPANIED BY REAL DEMAND EXPANSION. IN TURN, PRICES ARE RISING AND DEMAND IS RETREATING。

It's a stagnating shape, but it's not stagnating itself. Unemployment remains at 4.3 per cent, with 2.1 per cent of the increase during the past year showing no signs of recession。

Over the past five years, the United States economy has suffered successive shocks from the resurgence of the epidemic, the Russian-Ukrainian war, the reformulation of customs duties and the four supply-sides of the Iranian conflict. The interval between shocks is already shorter than inflation expectations. In March, 21.2 per cent of the increase in gasoline was due not only to the Iranian war, but also to the fact that the after-effects of the three previous shocks were not over。

The interest rate has been maintained at 3.5 to 3.75 per cent and has been suspended for three consecutive meetings. CME Fedwatch shows a maximum interest rate reduction in 2026. Of the 103 economists surveyed by Reuters, 56 think they won't move until September。

The second thing to hear tonight is this. How would Powell describe the current situation, whether to treat Iran as a one-off shock or to acknowledge that four shocks have changed the structure of inflation。

It's not the interest rate that Walsh wants

At the Senate Banking Commission's confirmation hearing on 21 April, the first sentence of Walsh's opening statement was: “Inflation is an option for which the Fed must be held accountable. The mission given to the Fed by Congress is to ensure that prices are stable, without excuses, ambiguity, contention or struggle.”

THIS WAS NOT PREPARED FOR THE HEARING. AS EARLY AS MAY 2025, WALSH’S SPEECH AT THE HOOVER INSTITUTE WAS ENTITLED “INFLATION IS AN OPTION”. IN JULY OF THE SAME YEAR, HE PUBLICLY STATED IN CNBC THAT THE FED NEEDED A RADICAL CHANGE OF POLICY COURSE. BOTH STATEMENTS WERE MADE BEFORE TRUMP OFFICIALLY NOMINATED HIM IN JANUARY 2026. WALSH DID NOT TAKE OVER THE FED, BUT WAS THE LAST STEP HE HIMSELF HAD PREPARED FOR OVER A DECADE。

AT THE HEARING, HE CLEARLY LISTED WHAT HE WANTED TO CHANGE AND ABOLISHED THE FORWARD GUIDE. THERE IS NO COMMITMENT TO KEEP PRESS CONFERENCES AFTER EACH MEETING. "A DIFFERENT, NEW INFLATION FRAMEWORK." THE CORE PCE INDICATOR NOW USED BY THE FED IS DESCRIBED AS "A ROUGH ESTIMATE"。

THE MARKET UNDERSTANDS THE IDEA AS MORE HAWK. BUT THIS LABEL IS TOO SIMPLE. WALSH SPENT A LOT OF TIME AT THE HEARING DISCUSSING AI. AI WILL INCREASE PRODUCTIVITY AND REDUCE INFLATION, THUS SUPPORTING INTEREST RATE REDUCTIONS. HE OBJECTED TO STRUCTURAL EASING. QUANTITATIVE EASING, EXPANSIONARY BALANCE SHEETS, ENDORSEMENT OF GOVERNMENT SPENDING, ALL OF WHICH HE WANTED TO CUT. HOWEVER, HE DID NOT OBJECT TO A LOW INTEREST RATE DRIVEN BY A PRODUCTIVITY DIVIDEND。

What he wanted to change was not the level of interest rates, the way the Fed spoke and why it could be endorsed。

ON 16 AND 17 JUNE, THE FIRST EVER FOMC, WHICH COULD BE PRESIDED OVER BY WALSH, IS THE REGULAR SEP MEETING, WHICH ISSUES UPDATED ECONOMIC FORECASTS AND DOT MAPS. HOWEVER, DURING THE HEARING, WALSH PUBLICLY PROMISED TO ABOLISH THE DOTS. THE STATEMENT OF 17 JUNE WILL BE THE FIRST TIME THAT THE PUBLIC HAS TESTED HIS CORRESPONDENCE. IF HE REALLY DOES NOT SEND OUT A SCHEMATIC, THEN THE FEDERAL RESERVE'S COMMUNICATION FRAMEWORK FOR THE PAST DECADE OR SO WILL HAVE ITS FIRST BREAKPOINT. ALL ASSETS THAT USE THE FED SIGNAL AS A FRAME OF REFERENCE MAY BE RETURNED TO A NON-TRANSMITTING STATE。

Tonight is the last paragraph of Powell ' s statement in his capacity as Chairman of the Federal Reserve, and the next one will start with Walsh. Walsh made a public promise that he would not say as much as Powell. Waste-looking guidance, with no commitment to a post-meeting development conference, would allow the Fed to speak down the frequency。

Starting tonight, the Fed will become more quiet。