We are moments away from Federal Reserve chairman Jay Powell’s press conference, which could be explosive and will have ramifications for the economy and markets deep into 2023. 

The fed has a few dilemmas.

M2 growth has evaporated, and history says CPI will follow.  If inflation is a monetary phenomenon, the Fed should be on guard for overshooting.  Powell mentioned the ‘lag effect” of policy last time; maybe, he’ll expound on the topic more today.

Also, the Fed wants to see unemployment climb, but history shows they have a terrible record of overshooting and creating so much unemployment carnage they have to start cutting rates.

Another issue is Fed funds are approaching core PCE – I’m not convinced the Fed will ever take fed funds above core PCE?

Hold on boys and girls. There will be fireworks, and if the Powell is practical, lift off.