A full recap of Fed Chief Powell’s market-moving comments on inflation

Market strategists and economists were split on the extent to which the Fed and Chairman Jerome Powell actually changed the central bank's strategy.

Eric Winograd, AB's senior economist, said that Powell's speech marked a "subtle but meaningful" change in the Fed's tact.

"In the past, the Fed has let bygones be bygones—if inflation was below target for a period of time, the committee did not take that into account when formulating monetary policy, aiming only to return inflation to 2%," he wrote.

"Now, however, the committee has explicitly indicated that 'following periods when inflation has been running persistently below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.'  Intentionally targeting an overshoot, even if only temporarily, is new for the Fed," Winograd added.

Others, like Wilmington Trust Chief Economist Luke Tilley, said he's not so sure the Fed made a material change to its policy stance based on Powell's speech.

"I might be going against the grain of some other people… I really don't think this is a very big change to what the Fed's goals are nor the way they will actually operate," he wrote. "I think the Fed has always had this as an operating goal. They always acted like this was their goal. But they haven't convinced markets of it. Markets overtime had become convinced that the Fed was biased on the hawkish side." — Thomas Franck

The Dow and S&P 500 have gained ground since the opening minutes of trading and last traded 0.9% and 0.5% higher, respectively. Dow industrials erased their losses for 2020 and was trading positive on a year-to-date basis around 10 a.m. ET. The Nasdaq Composite lagged, up 0.2% after briefly falling into negative territory.

The Nasdaq was hurt by weakness in several major tech stocks, with Amazon, Alphabet, Netflix and Facebook all falling. Meanwhile, bond yields moved higher along with bank stocks. JPMorgan Chase jumped more than 2%, while Wells Fargo and Citigroup gained about 1.8%. — Jesse Pound 

Chair Powell again reiterated the differences between the current economic downturn and past periods of contraction including the financial crisis.

"This really was a natural disaster that hit an economy that was doing well with a banking system that was well capitalized and highly liquid, and understood its risks pretty well," Powell said. — Pippa Stevens 

CNBC's Jim Cramer said he reads Powell's comments as, in essence, a signal from the central bank that it won't play any part in moderating growth and will continue to provide liquidity until the U.S. economy is outperforming expectations.

"Powell has laid down the law," Cramer said.

According to Cramer, what Powell has practically said is "'we're going to let things run.  And we're not going to be a part of the equation until the economy actually does even better than we think.'"

"This is incredible," the "Mad Money" host added. "He basically said, 'Hey guys: Go! Go get the economy back, I'll have your back. I'm not going to get in the way.'" — Thomas Franck

Bleakley Advisory Group's Peter Boockvar said that Powell was "reinforcing the extreme dovishness" of the Fed. "Gold is rallying close to $2000 and stocks are rising again. So the Fed is willing to risk rising financial stability risks because of the bubbles being inflated over the worries of the lack of inflation for consumers," he said.

"I remain confident that in the coming quarters, Powell and Co will get the inflation they want but they won't like when they see it. And then things will really get interesting for them and markets," he added. - Pippa Stevens 

Evercore ISI Strategist Dennis DeBusschere wrote shortly after the start of Powell's speech that the address was dovish as expected, but that the central bank's comments about inflation were crucial.

DeBusschere called out the following part of Powell's speech as the "money paragraph":

Said Powell: "Our new statement explicitly acknowledges the challenges posed by the proximity of interest rates to the effective lower bound. By reducing our scope to support the economy by cutting interest rates, the lower bound increases downward risks to employment and inflation. To counter these risks, we are prepared to use our full range of tools to support the economy." — Thomas Franck

U.S. stock index futures jumped as Fed Chair Powell announced a new inflation approach that would keep interest rates lower for longer. Dow futures gained 100 points or 0.35%. S&P and Nasdaq 100 futures were also about 0.3% higher. Bond yields, however, moved lower. - Pippa Stevens 

The Federal Reserve announced a major policy shift on Thursday and said that it is willing to allow inflation to run hotter than normal in order to support the labor market and broader economy.

In a move that Chairman Jerome Powell called a "robust updating" of Fed policy, the central bank formally agreed to a policy of "average inflation targeting." That means it will allow inflation to run "moderately" above the Fed's 2% goal "for some time" following periods when it has run below that objective. 

"Many find it counterintuitive that the Fed would want to push up inflation," Powell said in prepared remarks. "However, inflation that is persistently too low can pose serious risks to the economy." — Jeff Cox

Market strategists said that they expect Powell's speech to be one of the most impactful in recent memory and mark a fundamental change in the way the central bank treats inflation.

Krishna Guha, vice chairman of Evercore ISI and leader of its central-bank strategy, wrote that he expects Powell's address to "tee up a profoundly consequential and risk-friendly move to soft inflation averaging at the Fed's upcoming September meeting." Guha and his team expect the Fed to "seek a moderate inflation overshoot during the recovery phase of this cycle" as a way to avert "Japanification," or an extended period of low growth marked by weak inflation.

Ian Lyngen, head of rates strategy at BMO Capital Markets, wrote that "while it might prove to be a historic day for monetary policy as the Chair could ready the market for a new Fed framework for addressing inflation (or the lack thereof), the response in the Treasury market may be more benign."

"The history of Jackson Hole as the forum to roll out transitions in monetary policy is hard to ignore and expectations are in place for a grand reveal; making the prospects of disappointment also a concerning eventuality should Jay choose to play this one close to the vest," he added. "Moreover, informing investors the Fed will keep rates very, very low for a very, very long time isn't 'news' to a market pricing in nothing for several years." — Thomas Franck, Jeff Cox

Federal Reserve Chairman Jerome Powell is expected to detail in a virtual speech the central bank's monetary policy review from its annual symposium, which usually takes place in Jackson Hole, Wyoming. Investors widely expected the Fed boss to announce a shift in its inflation goal from a target of 2% to an "average target" of 2%. 

The central bank has for years tried to keep inflation at 2%, a rate of price increase that policymakers consider manageable and a byproduct of a healthy economy. But ever since the financial crisis, inflation in the U.S. has more often than not lagged the Fed's target.

Investors say that introducing an "average" target means the Fed can be more comfortable with inflation creeping above the 2% threshold so long as it's eventually offset by periods of below-average growth. — Thomas Franck