Powell's Flight Path to a Soft Landing
By John Persinos
The adroit navigational skill of Federal Reserve Chair Jerome Powell reminds me of this dialogue from the 1989 movie Indiana Jones and the Last Crusade.
Professor Henry Jones: "I didn't know you could fly a plane."
Indiana Jones: "Fly, yes. Land, no."
It's increasingly clear that Fed Chair Powell can both fly and land the plane.
At the conclusion of its two-day meeting Wednesday, the central bank's policy-making Federal Open Market Committee (FOMC) opted to leave the federal funds effective rate unchanged at 5.25% – 5.50%.
However, what boosted investor confidence were Powell's calm and reassuring remarks at his post-announcement press conference.
As the nation's chief economic navigator, Powell's mission is clear: to execute a smooth descent for the economy, while avoiding a crash landing. He's pulling it off.
Powell on Wednesday indicated that despite the FOMC's cautionary stance, rate cuts are a distinct possibility in the near future.
"The broad sense of the committee is that the economy is moving closer to the point at which it would be appropriate to reduce our policy rate," Powell said. "The question will be whether the totality of the data, the evolving outlook and the balance of risks are consistent with rising confidence on inflation and maintaining a solid labor market. If that test is met, a reduction in our policy rate could be on the table or as soon as the next meeting in September."
The FOMC's decision to stand pat, coupled with Powell's strong hints of impending rate reductions, cheered investors.
The main U.S. stock market indices closed sharply higher Wednesday as follows:
- DJIA: +0.24%
- S&P 500: +1.58%
- NASDAQ: +2.64%
- Russell 2000: +0.51%
The benchmark 30-year U.S. Treasury yield slipped 0.70% to settle at 4.36%. The CBOE Volatility Index (VIX), the so-called "fear gauge," plunged nearly 8% to land at 16.28.
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