Mike McKee

Yeah, if there is a takeaway, it would be that the Fed doesn't know what's going to happen because it does have this supply shock that's going to weigh on the inflation rate.

It could also, if the inflation rate stays up for a while, weigh on demand.

So the Fed is, as Powell repeated several times, well positioned to sit and wait for a while.

Now, if you look at Fed Funds Futures, they traded the opposite of where they've been during Powell's comments.

They now price in some cuts.

I'm not sure that's the right reading of this.

I don't think the Fed knows yet where they're going to go, except that they're going to be on hold for a while.

He noted risks to both sides, to growth and employment, and as well to inflation.

But express confidence the Fed will get inflation down to 2% at some point.

Well, it depends on what areas inflation flows into.

If it's oil prices, gasoline prices, those are things that the Fed can't do much about.

If it starts to get into the broader economy, which it will in the sense that higher diesel prices are going to mean it's going to cost more for your package to be delivered, that sort of thing.

For trucks to resupply the rest of the country.

If it starts to get into other areas of the economy, they might think about a rate increase, but they'll probably do more jawboning than anything else because they feel that at some point the straight will open.

The oil will flow again and it may take a while, but inflation will come down.

And he made the point that if the Fed raises rates now, the effects are long and variable and could take us a year or more to start to hit the economy and the economy might be in a totally different situation by then.

And the Fed rate move wouldn't be good news.

So the Fed is going to be very, very cautious about what they're going to do going forward because mostly they think this is going to be about oil prices.

And they just have to keep an eye on the rest of the economy.

Welcome back to Bloomberg Radio and Television.