FED: Powell: Still "Early Days" In Assessing Tariff Impact (2/2)

Still “Early Days” To Evaluate Tariff Impact: And incoming information and data haven't really changed the equation for the majority of the Fed, per Powell. He said that he expects there is "much more" to come on the trade front that keeps uncertainties elevated, despite increasing clarity about the eventual "effective" rate of tariffs. Powell didn’t make it sound like the Fed was close to getting all the information it needed to make a decision by September, emphasizing that it was still very early to determine the impact of tariffs on the economy. 

• "We are still a ways from seeing where things settle down. We are getting clearly more and more information and I think at this point... estimates of the likely effective level of tariffs is not moving around that much at this point. But at the same time, there are many, many uncertainties left to resolve. So yes, we are learning more and more. It doesn't feel like we are very close to the end of that process. And that's not for us to judge, but it feels like there's much more to come as well, looking ahead."
• He called it "early days" to be able to evaluate the tariff impact on inflation: "I think you have to think of this as still quite early days... what we see now is basically the very beginnings of whatever the effects turn out to be on goods inflation. And you know, I'll say again, they may be less than people estimate, or more than people estimate. They're not going to be zero...we are going to have to watch and learn empirically how much of this and over what period of time.  I think we have learned that the process will probably be slower than expected at the beginning.  But we never expected it to be fast.  And we think we have a long way to go to really understand exactly how we will be."

No Dot Plot Endorsement: MNI (and others) had thought Powell would once again acknowledge, when asked, that the June SEP showed a median Committee participant expectations of two cuts by year-end. This time, Powell didn't repudiate the Dot Plot but likewise he hardly endorsed it: "I couldn't point to it six weeks later as expressing people's thoughts. You can't do that." He said they didn't prepare an updated SEP at this meeting "and I don't like to substitute in my own estimate of what the SEP might be. I will say we haven't made decisions about monitoring all of the incoming data and asking ourselves whether the federal funds rate is in the right place."

Dissenting Views: Of the two dissents, Powell said "it's an unusual situation where you have risks to both your employment mandate and your inflation mandate. That's the nature of a supply shock. And it's probably not surprising that there would be differences and different perspectives on that, as well as different views of where the neutral rate is, so different views of how tight policy is... I would call it one of the better meetings I can recall from that standpoint." 

• He said that two participants (ie Waller and Bowman) "felt that the time had come to cut and for the reasons that they are going to express. I won't tell you the reasons. They will issue some kind of a thing in the next day or so" (referring to the traditional post-meeting statements from dissenters).