Powell’s “We Will See” Is Enough For The Markets

By Ven Ram, Bloomberg markets live reporter and strategist

On Wednesday, Fed Chair Jerome Powell often peppered his answers by intersplicing “Let’s see.”

As it turned out, that provided enough comfort for the markets.

You could parse his entire post-meeting remarks and why Treasuries rallied, but here’s what I took away.

This is what he essentially said:

“It’s a forecast of slower growth, some softening in the labor market and inflation moving down steadily, but not quickly…

…If the economy performs broadly in line with those expectations, it will not be appropriate to cut rates this year…

…If inflation comes down much faster, we’ll be seeing that, and that will be incorporated into our thinking…we’ll see.”

The markets read it thus:

“Well, essentially, let’s invert what you just said:

if the economy goes pear-shaped and inflation comes down a lot, you are willing to cut. We will bet our last farthing that inflation will come off rapidly.”

So what will decide who wins that tussle between the markets and the Fed?

There are plenty of indicators to look at, including core PCE ex-housing, which he emphasized.

For me, I will be watching core PCE inflation – now at 4.4% to come down to the 3.5% penciled in by the Fed for this year – before holding my breath.