During his speech at an event in Rhode Island, Federal Reserve Chair Jerome Powell stressed that “maintain[ing] restrictive policy too long” could unnecessarily weaken the labor market, while “eas[ing] too aggressively” could “leave the inflation job unfinished,” Goldman Sachs economists wrote in a research note published on Tuesday.
They pointed out that Powell said long-term inflation expectations were consistent with the Fed’s 2% target.
In the Q&A after the speech, though, Powell said he saw “meaningful weakness in the labor market.”
Powell also noted that markets “were pricing in the next six months what’s going to happen to rates, … so you’ll begin to see, and you’re already seeing, changes in rates, long before we make the decision.”
The economists added that this statement echoed his comments last week, hinting that the FOMC would likely deliver on at least part of the market’s expected path.