On the April FOMC

In the most highly revised FOMC statement in months, the Fed has upgraded its view of the economy. Risks are no longer “considerable” yet they “remain. There were no changes to policy, and from the first question in the press conference, Powell was clear that the FOMC isn’t even talking about it. As at the last three pressers, Powell was asked repeatedly about the risks of coming inflation. His answers ranged from well-prepared arguments to stammered econobabble. But he retains his conviction that a post-pandemic rise in the price level will be transitory. Toward the end of the presser he noted that market-implied inflation expectations are still below, but getting near, mandate consistent levels. We interpret this more as his appreciation for progress in hand, rather than a warning that they are approaching dangerous levels.