Guess, speculate, or assume.

• US stocks slipped late Thursday after Fed Chair Jerome Powell indicated that strong economic conditions allow the Fed to be cautious with future rate cuts.

• The S&P 500 and Nasdaq dropped 0.6% each, and the Dow fell over 200 points.

• The decline followed an October producer price index report showing a 0.2% rise, meeting expectations, though core PPI exceeded forecasts.

• The October consumer price index, released earlier, also aligned with expectations but pointed to ongoing inflation pressures.

• Investors are evaluating the durability of last week’s post-election rally that lifted major indices to new highs.

We heard from Jerome Powell for the first time since the November 7th post-FOMC press conference. He was in Dallas at a World Affairs Council event, where he delivered some prepared remarks and did Q&A. 

Here are some takeaways:

With the CPI and PPI data of the past two days, they project their favoured inflation gauge, PCE, to come in at 2.3% when it's reported on November 27th. That would be an uptick by two-tenths of a percent.

"the economy is not sending any signals that we need to be in a hurry to lower rates."

That sent yields higher, stocks lower and the interest rate market priced OUT some of the near certainty on a December rate cut. Add to that, in last week's post-meeting press conference, Jerome Powell was asked how the Trump agenda is influencing the Fed's view on inflation and rate setting. 

"… in the near term, the election will have no effects on our policy decisions  … We don't know what the effects on the economy would be … and to what extent those policies would matter for the achievement of our goal variables, maximum employment and price stability. We don't guess, we don't speculate, and we don't assume." 

That wasn't the case in 2016. The host brought this up, and Jerome Powell wasn't too pleased to hear it.

Following the 2016 Trump win the Fed hiked rates in December, restarting what had been a one-and-done rate hike campaign from a year prior (the economy was too weak, and they abandoned the tightening plan after just one hike in 2015). 

Also in that December 2016 meeting, the Fed revised UP inflation forecasts, saying "some of the participants" incorporated the "assumption of a change in fiscal policy" into their projections.

So, yes, the pro-growth Trump agenda did indeed influence the Fed's policymaking back in 2016 (just a month after the election). They did assume a hotter price pressure environment was coming, enough to proactively hike rates in an economy that had averaged only slightly above 1% PCE inflation that year.