Fed Chair Powell (Q&A) says Well aware that a series of inflation shocks have interrupted progress, there will be some effects on inflation coming forward
- It is important for Fed to see progress on reducing goods inflation this year, this is the main thing the Fed is looking for
- Whether to look through eneger inflation does not arise until Fed has checked the box on goods inflation
- Looking through oil prices depends on inflation expectations expectations and broader context of five years of prices above target
Context
Fed Chair Powell's comments highlight the ongoing concern about inflation dynamics, particularly the need for progress in reducing goods inflation before assessing energy prices' impact. This suggests that monetary policy may remain tightly focused on controlling goods inflation as a priority, which could influence rate expectations and cross-asset pricing going forward, particularly for the USD and fixed income.
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