Powell seems to maintain this view on Wednesday.

"If the inflation shock will dissipate on its own, then tightening policy is not the right policy, and that remains true," Powell said. "If it's not necessary, don't do it."

In summary, Powell's comments overnight conveyed the message that while the probability of a recession is high, it is not concerning. Inflation remains severe, but it is not worrisome. What about trade policy? It will become clear when the time is right. In short, there is no reason to take any action on the current monetary policy path.

For the beleaguered U.S. stock bulls, this news was a sigh of relief. The S&P 500 surged 1.8% before the close. The 1.1% closing gain is still the best performance since the Fed's decision day in July last year. Even bond investors were encouraged by Powell's 'stick to it' tone. They rushed to raise prices, pushing the benchmark 10-year U.S. Treasury yield down for the third consecutive day. This is the first time in eight months that these two assets have risen in tandem after a Fed decision.

As widely expected, the Fed kept interest rates unchanged on Wednesday and indicated that officials still believe there will be two rate cuts this year, while lowering their expectations for economic growth and raising their outlook for inflation. On the surface, this combination has a bit of a stagflation flavor, which is not a good recipe for a rebound in risk assets, but Powell's transitory inflation remarks at the subsequent press conference eased Wall Street's concerns.