Powell Reveals Dovish Tone: Interest Rates May Have Peaked, Fed Focuses on Liquidity Environment

Powell revealed a strong dovish tone at the latest FOMC press conference. He first indicated that interest rates may have peaked, and the Federal Reserve will decide when to adjust policy interest rates based on economic data and the need to balance risks; he firmly believes that financial conditions have tightened enough, and expects QT easing to begin soon.

 

He selectively ignored the resurgence of inflation in January-February, as well as significantly rising prices of inflationary assets/risk assets such as crude oil/stocks, reiterating that inflation is on its way to 2%. At this stage, what concerns the Federal Reserve most is domestic liquidity environment: The risk of "insufficient" liquidity seems greater than "excessive", especially in a crucial election year.