The market opened lower and began climbing higher after Jerome Powell statement was released. His comments were mostly the same as recent public commentary. Although you could feel the excitement with the shift in third quarter residential investments, after a long period of negative growth. 

Monetary Policy

Without a doubt, the most important comment and observation on monetary policy is the commitment to be data depended and remind everyone the Fed is not on a pre-set policy.

We will be monitoring the effects of our policy actions, along with other information bearing on the outlook, as we assess the appropriate path of the target range for the federal funds rate. Of course, if developments emerge that cause a material reassessment of our outlook, we would respond accordingly. Policy is not on a preset course.

Even during the question and answer period, Powell read from his statement again to reassure folks that the Fed won’t go on autopilot, especially when it comes to future rate hikes.

On Risk

However, noteworthy risks to this outlook remain. In particular, sluggish growth abroad and trade developments have weighed on the economy and pose ongoing risks. Moreover, inflation pressures remain muted, and indicators of longer-term inflation expectations are at the lower end of their historical ranges. Persistent below-target inflation could lead to an unwelcome downward slide in longer-term inflation expectations.

Powell has been asked questions on wide-ranging topics including:

• Income inequality (incomes and prosperity should be shared, and we want to see mobility)
• Community Reinvestment Act (agree with mission but should be modernized)
• Climate change (important issue but not for the Fed to decide)
• Venture Capital only in four states (regrettable)

Powell raised a flag on business debt levels on his written statement and during question and answer period while praising the ability of households to service debt.

Debt loads of businesses are historically high, but the ratio of household borrowing to income is low relative to its pre-crisis level and has been gradually declining in recent years.

Powell pushed back against his questions, by pointing out they could be a big help by implementing policies that not only address national debt levels but also spurs on labor participation and improved productivity.

Consumer Prices and Insidious Tariffs October 2019

I wish I could say I’m shocked prices dropped and, in some cases, shifted into free fall on items heavily imported from China, but I’m not shocked.  Those costs are being absorbed in many ways long before potentially reaching the American consumer.

Percentage Change

• TV -1.5%
• Toys -1.3%
• Apparel -1.8%
• Women’s Suits -5.7%
• Footwear -0.5%
• Dishes -2.4%
• Major Appliances -2.6%
• Floor Coverings -4.3%
• New Vehicles -0.2%

Persistently low inflation in several areas continues to keep inflation well-below the Fed’s target.

Overall core CPI grew 2.3% year over year is sharply lower than the 3.0% expected. It is an obvious worry for the Fed.