His speech increases the odds that "One & Done" will finally occur: the Fed is now more likely to stop at 5.0% than I previously believed.
"Focusing on the medium-term forecast
horizon is necessary because of the lags with which monetary policy affects the
economy. In my view, data arriving since the last FOMC meeting have not
materially changed that assessment of the risks. In particular, even if in the
Committee’s judgement the risks to its objectives are not entirely balanced, at
some point in the future the Committee may decide to take no action at one or
more meetings in the interest of allowing more time to receive information
relevant to the outlook"
As we previously observed, the Fed Halt is now baked into the cake; Going forward, we need to watch for what we previously viewed as the worst scenario for the markets: The Fed appeases the markets, halts tightening, and gets behind the inflation curve. After letting inflation get away from it, they subsequently resume tightening, and its a debacle for the markets.
On the scale of hawkish/dovish past Fed Chairs, Bernanke clearly sits near "easy Al" Greenspan end of the spectrum, and far far away from the tough Paul Volcker / William McChesney Martin inflation hawks. So much for that vaunted muscularity we were going to see.
Ben Bernanke is now the Neville Chamberlain of Inflation
Fighters . . .
I think Gold — and most of the commodities — just got a whole lot sexier . . .