➡️Powell has finished his press conference — here are the key takeaways:

⚪️ The median forecast for the rate path has not changed, but noticeably more participants now expect fewer rate cuts.

⚪️ In the short term, rising energy prices will exert upward pressure on headline inflation.

⚪️ This year it is truly important to see progress in disinflation on goods to understand whether we are making progress.

⚪️ The consequences of the oil shock will put some pressure on spending, employment, and create inflationary pressure. But no one knows the scale of the consequences in the Middle East.

⚪️ The overwhelming majority of FOMC members do not consider a rate hike as the baseline scenario, but the possibility was discussed.

⚪️ If I do not see progress in fighting inflation, you will not see rate cuts.

⚪️ The Fed is in a difficult situation and is balancing between inflation risks and the labor market, trying to avoid overly tight policy.

Overall, it is clear that Powell and the Fed themselves do not fully understand what the Middle East situation will ultimately mean for the economy. Hence — a lot of talk about inflation and much lower expectations for rate cuts.

It feels like the priority is shifting more toward inflation, even though Powell acknowledges that the Fed is in a difficult position and is trying to balance between inflation and the labor market. But we understand that under current conditions they essentially have no “right” choice, and there is a clear tilt toward fighting inflation.

Therefore, the number of rate cuts this year may be reduced — and the market reaction is corresponding.