8:41 a.m. ET, June 16, 2022
Post-Fed hangover for Wall Street
From CNN Business' Matt Egan
Traders work, as Federal Reserve Chair Jerome Powell is seen delivering remarks on a screen on the floor of the New York Stock Exchange in New York City, on June 15.
(Brendan McDermid/Reuters)
That was fast. The Fed rally lasted all of two hours. US stocks are on track to open sharply lower.
In some ways this makes more sense than yesterday’s gains. The Fed’s aggressive rate hike, the biggest since 1994, does little to resolve the vast uncertainty facing the American economy right now.
Jay Powell declares war on inflation: The Fed chief was even more emphatic than in the past about just how seriously the central bank is taking both high prices and, importantly, inflation expectations. “We have to restore price stability. We really do. It’s the bedrock of the economy,” Powell said during the press conference. “If you don’t have price stability, the economy won’t work…Wages will be eaten up.” Not only did Powell concede that people hate inflation (“It’s really something people don’t like”), but he said the recent jump in consumer inflation expectations was “eye-catching” and forced the Fed to act.
Less emphatic about a soft landing: Powell said he believes it’s “possible” the Fed will achieve a “softish” landing – where inflation is tamed and a recession is avoided. However, Powell conceded that task has become more challenging and there is a “much bigger chance now that it’ll depend on factors that we don’t control.” He added, “fluctuations and spikes in commodity prices could wind up taking that option out of our hands.” Powell said, “We just don’t know.”
Fed GDP tracker flashes red: The
ugly May retail sales report – the first decline since last December – has forced economists to mark down their GDP estimates. As of yesterday, the Atlanta Fed’s GDPNow model is
estimating second-quarter growth at zero, down from 0.9% a week ago.