Hey everyone we kevin here: let's do a breakdown of exactly what jerome powell just said. What we got from the summary of economic projections, what we have in terms of when inflation is expected to go down how it's going to go down, because jay powell gives us kind of an interesting path for how he expects inflation to go down, which is really Important because then we can align with that expectation to where, if we see month-over-month deviation in that, we know to either go bearish or bullish. Okay, folks, let's get right into it, we'll also get answers on the wage price spiral and a whole lot of other information. This was a very good fed meeting started off a little dirty, though, because we got the sep.

The scp came in much worse than expected. Gdp came in at an estimate of 2.8 percent for 2022.. The bloomberg estimate was three point: five percent. I was guessing between three and three five.

Seeing a two in the front was not good. Markets did not like that. In fact, if you see what markets reacted with when they saw that gdp decline, we started getting fears of stagflation. We saw markets quickly, move down here, breaking below uh some of our support levels here only to recover later in the meeting, and that's because of jerome powell's responses to some of the things that we saw here.

The inflation number on the projections here was not something that we thought would be very important to pay attention to anyway, and instead, something that we really wanted to watch for was this right here, the fed's, the fed funds rate expectation was 1.9 for the end of The year, including today, there are seven meetings left for the rest of the year. That includes the meeting that just concluded. So that means we only have six more to go. If every of these seven meetings results in a .25 basis or 0.25 or 25 basis, point hike, then we would end up with at an end of the year, lower bound interest rate of 1.75 with an upper bound at 2 and that could align with this 1.9 Percent, though, what was a little shocking was, the range of estimates were substantially larger, potentially suggesting that we could end up seeing higher rates like a 50 basis, point hike towards the end of the year.

If we see a, if we don't see inflation come down, you've got pretty much. What we're assuming is uh bollard over here, who was the only dissenting member during this meeting to raise rates a quarter of a point which, obviously we raised rates a quarter of a point. That's the headline news big deal, uh bullard was going for a 50 basis. Point hike he was the only one so by a vote of eight to one, we did get a 25 basis, point hike.

Uh again. Bloomberg was expecting here something around uh, an estimate of about 1.55 sorry. This is bloomberg right here. Bloomberg was expecting 1.55 to be the end of the year rate.

I was expecting 1.6 as the end of the year rate. We ended up getting 1.9, so this is where we initially got some of that heartache. When we first saw the scp come out, we're like. Oh crap, less like higher rates and worse gdp, not good, so the market's reaction initially was very negative.

Fortunately jpow, whether through clever wordsmithing or what ended up talking his way straight out of the pain, because he gave us a lot of clarity. So, let's go through exactly what he said: first uh, regarding rates, okay, we're up 25 basis points. We expect to pretty much raise rates at least the the seven meetings this year, uh, including this one. So each of the next six meetings we're expecting to raise rates quote steadily and even at one point, jerome powell mentioned yeah seven rate hikes this year.

Now i don't know if he meant to say that or if he was hypothetically saying that, but he did, those words did come out of his mouth and i think that's because honestly, that's just the baseline expectation right now that at every single meeting this year, the Six more to come, we will have a 25 basis point height. Also, a lot of progress was made on balance sheet reduction. The full plan is expected to be announced in a coming meeting, but they're actually going to give us a lot of guidance in the minutes that come out in about three weeks for this meeting. In terms of what to expect, he said it would be very familiar to us.

Usually we see about a 90 billion per month balance sheet runoff, and that means it would take us somewhere around 15 to 16 months to actually really start constraining the economy, because there's so much money floating around in banks and on the on reverse repo balance sheets. That that really it's going to be a while before the balance sheet, actually impacts the economy. In my opinion, there's going to be a big lag here of probably a year to a year and a half. The rates are going to matter more for constraining the economy and bringing that inflation down, but it could be as soon as the may meeting that they start reducing the balance sheet.

Not this time regarding gdp - and this was really important because remember that scp was ugly. Why did it come in at 2.8 percent? Jerome powell says it came in at 2.8 because of spillovers from the war higher oil and higher commodity prices, and that this is why they assessed a 2.8 gdp. However, he says - let's remember, this is still very strong. He put us back into like historic perspective.

He did a really great job here. He says. Look 2.8 percent is great. We expect it to be like 2.1 and 2 for the years going forward.

In fact, you could see exactly that. I'll show you that really quick in the summary of economic projection, so you can see that uh there you go top line number right here. We expect uh 2.2 percent in 2023 and 2 percent of 2024 and he goes back and says: look if we got a 2.8 percent print and we weren't you know, and we didn't have the pandemic. 2.8 would be a great thing, so it shouldn't be seen as a negative that we came in at 2.8.

Even though that was my initial reaction and so was the market's initial reaction first, then he was asked uh. So this was interesting. He says uh this. This would have been one of the strongest years again had it not been for the pandemic, then he talks about employment and the wage price spiral he talks about how a way uh labor force participation going up should actually help reduce wage pressures and eliminate the risk Of a wage price spiral, there are currently 1.7 job openings for every unemployed person and he does agree that wages going up is a great thing.

He sees wages going up, but he says this is an important line here. Listen to this one quote: increases are consistent with two percent inflation over time. We do not see evidence of a wage price spiral. Huge.

Okay, that's that's really big. That doesn't mean he's right. Uh, you know numbers could change next month. We could go oh crap right but remember.

The last bls labor report came in. It was zero percent month-over-month inflation uh for wages which not so great for workers, but in terms of the wage price file, great uh, he was very frustrated about people, suggesting that the federal reserve is behind that they're falling behind and - and he very aggressively, replied and Said look: some of our estimates actually put. Our estimates for interest rate increases above the neutral rate. The neutral rate is two percent to about two and a half percent and uh.

What we're seeing on some of these projections is that we could actually end up seeing the uh our interest rates, our federal reserve interest rates here they see the projection, how it says: 2.8 percent there for 2023 and 2024 - that is above the neutral rate, and so J-Pal is like this is us running ahead. This is us not behind. So obviously a lot of people listening to this are going to say, dude he's way behind, because because he is but he got really frustrated about people saying that he's like we're not behind we're. On it, so a little bit of a j-pal anger there uh, which quick note in case you're, wondering why i'm wearing the chef outfit it's because we've got a special kevin's kitchen coupon code down below for the programs on building your wealth.

Shout out to those of you getting into the stocks and psychology of money group you get all my buy, sell alerts, see where i'm moving, where i'm positioning my portfolio, those of you who got into the wealth course real estate agent course and the real estate investing Programs uh the 10-year treasury's jumping quite a bit and that's going to create some real estate headwinds, so excited to talk to you all course, members about strategizing for that: okay, moving on with uh j-pal here. So what about supply disruptions, obviously lasting longer than expected? But how is inflation going to be measured now, and this was so beautiful, because you've heard me on this channel talk about how there's old inflation and that's the original kovid shock, the original supply chain disruptions and then there's the new inflation and those two have now Merged to create this monster of inflation, and so the question is jerome powell: when did you expect inflation to go down originally, and how do you think inflation's going to go down now? This was really interesting. So what i did is, i drew a picture to basically show you uh graphically what he said. So this is that picture right here.

Okay, so here's how this works - the green line - let's just say, with these little green dates here - was his original expectation. He thought that we would see a peak uh in march of 2022 that we would hit peak inflation and then the course is really interesting. He said that he thought inflation would come down level out for a while and then towards the end of the year. In q4, going towards december fall more rapidly, however, because of the new style of inflation, he now appears to be pricing in about a three to four month, delay to the peak, so this actually makes the peak more likely to be around q3 2022 uh.

That would be somewhere around uh. Let's see we got april may june, there will be about july right, maybe somewhere between july and september, for the uh for the end uh. So now, if we look at uh the same course, he ends up saying that he doesn't believe we're going to see that we'll see that leveling off, maybe between q3 and q4, but then that more rapid deceleration and inflation, not until the first quarter of 2023. He says so, in other words, he's delayed everything by about three to four months.

What does this mean for you? Well, it means you really have to a watch. The month-over-month data really really important, because the year over year is going to have. You know some high comparisons to last year in may june july, but the month-over-month data is what you want to watch, but also you really want to watch this time frame right here june july august september. That's what you want to pay attention to.

Why do you want to pay attention to that time frame? Because we know the next cpi report that comes out from march april? May we know all those reports are going to be high because of war. That's already priced in the feds are already looking past that, in other words, the fed thinks that right now we're doing this. We're still going on the roller coaster right over here, right, uh, and so when we, when we get to that peak uh or at least q3 of 2022. If we don't actually hit a peak in q3, that's probably when the fed's going to have to be a little bit more aggressive and go for that 50 basis.

Point hike! That's a really really big takeaway from this fed meeting. So you really want to sear that that image or like print it out or whatever into your mind, because it's a really big deal for what he just said. So uh. Of course he mentioned his goal is to promote a long expansion which is only possible with price stability.

He uh does say it's going to take longer than expected to get inflation back down, but they're going to be very nimble when it comes to the data. Okay, this is not so exciting. Here is more exciting recession. He says, in my view, the probability of a recession is not particularly elevated right now he brushed off questions about the 10-2 did not care about the potential for an inverted yield curve at all, does not see an increased potential in a recession says the labor market Is strong payroll job growth is continuing household and business balance sheets are very strong uh.

We know we found out this morning that the average consumer balance sheet is larger by the tune of about 16 600 dollars, so we still have excess money in basically our savings accounts or whatever and jerome powell combines all this data and says: look we we think The economy is set for uh easily, absorbing these potentially seven rate hikes over the you know the next uh uh you know now set including today seven meetings to come and uh no big issues here regarding sanctions he's in favor of the sanctions, but really tried to Dodge any kind of uh political liability there uh, and so it didn't have much for us to say there, but i think if, if we sum this up honestly, what did we get here? Folks, no rug, pull! This is what we were expecting. We were not expecting to get rug pulled. We pretty much got what we expected. We did get a worse estimate for gdp and a little bit higher of a of an estimate for the fed funds rate, but we've been we've been expecting seven straight 25 basis.

Point hikes so: okay, a little softer gdp. We got what we expected on inflation talk. We now know a time frame for inflation. We know what data they're going to look at i mean i, i you can't communicate any more clearly than drum powell did today.

There's no rug, pull. It shows us that he's not trying to you know, surprise us or shock and awe us bullard is but bullard's in the minority. He was the one voting all by himself of the other eight people like bollard, your nuts. You know it's like bullard's trying to do the uh bill ackman, you know shock and awe, and everybody else is like you're nuts, okay, we're gon na wait for that data july to september we're gon na be patient with it.

We think the economy is capable here. Personally, with uh the spy and the qqq barely off their zero percent fibonacci lines, i'm bullish on this. I like this meeting a lot. I was a little nervous initially when i saw that sep but coming out of it.

I'm happy about this. Thank you so much for watching. If you want to see exactly what i'm buying check out those programs linked down below thanks so much for watching folks, and we will see you in the next one thanks so much bye.