LAST FOMC, POWELL LEFT THREE SURPRISES FOR THE MARKET

"THANK YOU VERY MUCH. I WON'T SEE YOU AGAIN." THIS IS THE LAST THING POWELL SAID TO YOU AT THE FOMC PRESS CONFERENCE THIS MORNING。

This should have been a smooth farewell. Interest rates were maintained at 3.5 to 3.75 per cent, no dot-line maps, no updated projections, and the President left office to congratulate Walsh. The market has priced these two hours as a procedure。

But Powell, who last came on stage, left a few surprises。

He's not leaving

The first is the final paragraph of the opening statement. After talking about inflation, employment, interest rates, Powell announced that he would continue to serve as a board member after he left the presidency on 15 May. The deadline is "to be determined"。

His reason is not personal, but institutional. “My real concern is a series of legal attacks against the Fed, which threatens our ability to implement monetary policy without taking political considerations into account. According to Powell, "the legal actions taken by this administration are unprecedented in our 113th year of history."

He has a clear border. He will not leave the Council until the Ministry of Justice's investigation of the Federal Reserve is “complete, transparent and finally concluded”. Even though the Department of Justice dropped the case last Friday, Powell noted that the withdrawal statement contained a sentence that she would not hesitate to reopen the investigation if needed. Powell specifically brought that up。

At the same time, he made it clear that he would not become a "shadow president". He will return to his role as a member of the Council, respect the role of the President and “do as much as he can to support the President as he can, not when he cannot”。

He didn't say he was going against Walsh, but he didn't promise not to. He chose to stay and tied the phrase "the Fed's independence is at risk" to his own. It's a continuous presence. As long as he's sitting at that table, it's still working。

The Chairman of Powell will serve until 15 May. But he's a board member until 2028。

THE MOST DIVIDED FOMC SINCE 1992

THIS FOMC MEETING LEFT FOUR VOTES AGAINST. THIS WAS THE FIRST SUCH INTERNAL SPLIT IN A SINGLE MEETING OF THE FED SINCE OCTOBER 1992。

Powell's own interpretation of the matter is: "This is part of the inevitable outcome of our response to the extreme supply shocks of the past five to six years."

4 OF THE OBJECTIONS, THREE WERE DIRECTED TO THE SAME THING, AND THE FOMC STATEMENT RETAINED THE PHRASE “EASING TENDENCIES”. ACCORDING TO ONE MEMBER, THE CURRENT INFLATIONARY ENVIRONMENT SHOULD NO LONGER BE MAINTAINED AND SHOULD BE NEUTRAL, IMPLYING THE SAME POSSIBILITY OF HIGHER AND LOWER INTEREST RATES。

why? because inflation is moving in the wrong direction. powell himself described inflation as "misbehaving" with a less common term。

THIS IS SUPPORTED BY THE FACT THAT POWELL HIMSELF SET OUT. IN MARCH, THE OVERALL PCE INCREASED BY 3.5 PER CENT, DUE TO THE SHARP RISE IN GLOBAL OIL PRICES DRIVEN BY THE MIDDLE EAST CONFLICT. THE CORE PCE RATIO OF 3.2 PER CENT REFLECTS TO A LARGE EXTENT THE IMPACT OF TARIFFS ON PRICES IN THE COMMODITY SECTOR. OIL PRICES ARE NOT AT THEIR PEAK. IN THE PRESENCE OF JOURNALISTS, IT WAS MENTIONED THAT BRENT CRUDE OIL IS NOW APPROACHING $120 PER BARREL, SIGNIFICANTLY EXCEEDING THE US BANK ' S PREVIOUS $100 PER BARREL BASELINE FORECAST. BUT POWELL HIMSELF IS STILL OPPOSED TO CHANGING THE DIRECTION IMMEDIATELY, AND REMAINS THE SAME: "THE ROAD AHEAD IS FULL OF UNCERTAINTY, AND MUCH NEEDS TO BE UNDERSTOOD AND THERE IS NO NEED TO RUSH TO A DECISION NOW."

He added a historical reason. The United States economy has actually experienced four supply shocks: the outbreak, the Russian-Ukrainian conflict, tariffs, and now the Iranian crisis, as well as soaring oil prices. Each supply shock has the capacity to push up inflation and unemployment, and it is difficult for central banks to know what to do. The difficulty lay in how the Committee could read the situation as it stood after four shocks had piled together. Some felt that inflation was stubborn and needed to be tighter; others felt that it was the transmission of cumulative shocks that was lagging, needed, etc.; and others felt that the current level of interest rates was already tight enough. Powell said, "It would be surprising if there was complete agreement."。

However, the disagreement reached its worst level since 1992 and was itself a sign. He knew that the Commission was approaching a neutral position. He had, however, chosen to leave the decision to change to the next meeting. The next meeting was from 16 to 17 June, but the moderator was no longer him。

WALSH TOOK OVER A SINGLE FOMC. THE MACHINE HAD BEGUN TO SPLIT INTERNALLY ON THE NIGHT BEFORE THE HANDOVER, THERE WAS NO CONSENSUS ON THE SITUATION AT HAND, THERE WAS NO CONSENSUS ON THE POLICY PATH, AND THE COMMISSION WAS CLOSE TO TURNING THE WHEEL EVEN IF THE WORDS "FORWARD GUIDANCE" WERE TO CONTINUE。

Two gifts he left for Walsh

The third is not in the opening statement, but in his answers to several different questions. Powell did two simultaneous opposites in two hours, preparing an endorsement for Walsh and drawing a red line。

The endorsement points to a communication framework。

AS FOR THE DOTS, POWELL SAID, "I WAS NEVER THE BIGGEST FAN OF THE DOTS." HE ACKNOWLEDGED THAT, AT THE TIME OF LAST YEAR'S COMMUNICATION REVIEW, THE COMMITTEE HAD CONSIDERED AMENDING THE SEP, BUT “CANNOT GET BROAD SUPPORT IN THE COMMITTEE”, SO HE HAD TO GIVE UP HIMSELF. WITH REGARD TO WALSH'S POSSIBLE ADAPTATION OF COMMUNICATION, HE ASSESSED THAT EACH INCOMING PRESIDENT WOULD LOOK AT COMMUNICATION, WHICH WAS A VERY HEALTHY THING, AND MADE IT CLEAR THAT IT WOULD BE “BE PERFECTLY APPROPRIATE” IF THAT HAPPENED。

Put these words together, and it's clear: He himself wanted to change, but he couldn't. Walsh wanted to change, and it would be perfectly appropriate for Walsh to abolish the dots at the June meeting。

The red line points in another direction。

In a recent speech, Councillor Waller opposed the dismissal of the Governor of the Reserve Bank, based on a monetary policy perspective. The Governor of the Reserve Bank is not a Federal Reserve Governor and is the Governor of 12 regional Federal Reserve banks, appointed by the District Board and independent of government personnel。

When asked about Waller, Powell took the initiative to increase the topic, “If every government can intervene and do so, it will be the beginning of the end of the Fed's ability to independently formulate monetary policy, when you will be just another cabinet body”

The weight of this phrase is where it appears. From an operational point of view, Powell took the opportunity to indicate the red line that was the most heavy for the entire launch, which was equivalent to the issuance of a memorandum in person. While Walsh can change the communication framework, he can take forward guidance, he can re-establish the inflation framework, but the Governor of the Reserve Bank cannot be dismissed on the basis of differences of opinion, and the Fed cannot become another cabinet body。

These two boundaries were given in person at the last press conference。

The last sentence of the press conference, "I won't see you again," was for journalists, not for the Fed. On May 15, Powell resigned as President, but he will not leave the building。