Updated: 06-25-2019

In a speech on the Economic Outlook and Monetary Policy Review given at the Council of Foreign Relations today, Fed Chair Powell said much of what he said last week following the FOMC meeting.

In that sense, one could see it as a dovish speech. The problem today perhaps is that Fed Chair Powell's remarks didn't necessarily make it clear that the Fed is inclined to cut the target range for the fed funds rate by 50 basis points at the July meeting.

That sense of matters is wrapped up in the following two observations made in the speech:

  1. "Against the backdrop of heightened uncertainties, the baseline outlook of my FOMC colleagues, like that of many other forecasters, remains favorable, with unemployment remaining near historic lows."
  2. "But we are also mindful that monetary policy should not overreact to any individual data point or short-term swing in sentiment."

This speech followed on the heels of St. Lois Fed President Bullard saying that he thought a rate cut would be coming in July, but that he doesn't think a 50-basis points rate cut is necessary.

Accordingly, the Powell speech served as another focal point that tempered the market's growing, and pent-up, hope that the Fed would cut by 50 basis points at the July 30-31 meeting. It could still if events, and data, unfold in the interim that suggest such a cut is necessary, but for now, there appear to be some emerging hints in the Fed commentary that suggest the market is probably getting greedy with the expectation that a 50 basis points cut is on the way.

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