For the past year, a strawman phrase used repeatedly by the Fed to grant itself a green light to do whatever it wants, is that it needs to see “substantial further progress” before it tapers, hikes, tightens, etc., i.e. changes the current regime of $120BN in liquidity injections every month (which judging by today’s near record $965BN reverse repo end up right back on its balance sheet).

During today’s presser, first CNBC’s Steve Liesman and then several other reporters pressed Powell on what this most insidious of Fed phrases means, and in what was the most clear response by Powell, the Fed chair said that “substantial” basically refers to strong job numbers and progress toward maximum employment. Notably this means that the Fed isn’t even remotely worried about soaring inflation, and the gating factor to tapering, hiking, etc, will be the unemployment rate, and – in light of the Fed’s Social Justice Warrior mandate – most likely the black and hispanic unemployment rates which will take a long, long, long time to normalize (if ever).

Furthermore, Powell underscored the lack of inflation concerns in a subsequent question, when asked about language in the FOMC statements from March and April regarding inflation not being present, Powell said the Fed isn’t considering that language as inflation phrasing was associated with ‘liftoff’ which the US economy is nowhere close to (first we need to taper $120BN in QE which will not be done until the end of 2022 at best). And since the Fed is more than a year away from that point, Powell said they’re not considering that question.

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