Nothing New Under the FOMC Sun
An update on the latest FOMC participants’ statements on inflation and possible path for monetary policy.
We have heard from: Williams, Bullard, George, Barkin, Bostic, Evans, and Harker.
Keep in mind
No major news this week. Most participants repeated previously stated views. Overall, the FOMC remains determined in fighting inflation and thinks that the monetary policy path signaled at the March meeting is appropriate for a soft landing.
FOMC-meter
Dovish
Leal Brainard
John Williams
Charles Evans
Mary C. Daly
Neel Kashkari
Neutral
Jerome H. Powell
Michelle W. Bowman
Thomas I. Barkin
Hawkish
Christopher Waller
James Bullard
Esther L. George
Loretta J. Mester
Raphael Bostic
Patrick T. Harker
Note: FOMC voters are bolded.
Recent FOMC participants' statements - most recent statements in blue
Jerome H. Powell – Chair – Dovish
No recent statements.
Lael Brainard – Governor – Dovish
No recent statements.
Christopher J. Waller – Governor – Hawkish
No recent statements.
Michelle W. Bowman – Governor – Neutral
No recent statements.
John C. Williams – New York Fed President – Dovish
April 2
From Reuters (here). The Federal Reserve needs to move monetary policy towards a more neutral stance, but the pace at which it tightens credit will depend on how the economy reacts, New York Fed President John Williams said Saturday.
“We need to get closer to neutral but we need to watch the whole way,” Williams said. “There is no question that is the direction we are moving. Exactly how quickly we do that depends on the circumstances.”
“We expect inflation to come down but if it does not….we will have to respond. My hope right now is that won’t happen,” Williams said.
“Uncertainty about the economic outlook remains extraordinarily high, and risks to the inflation outlook are particularly acute,” Williams said.
However, he said he expected the combination of rate increases and balance sheet reduction to help ease inflation to around 4% this year, and “close to our 2 percent longer-run goal in 2024” while keeping the economy on track.
“These actions should enable us to manage the proverbial soft landing in a way that maintains a sustained strong economy and labor market,” Williams said. “Both are well positioned to withstand tighter monetary policy.”
Fed Presidents with voting power in 2022
James Bullard – St. Louis Fed President – Hawkish
March 29
From St. Louis Fed (here). “Inflation has surprised substantially to the upside since mid-2021″.
“The FOMC must now follow through with policy rate increases and balance sheet runoff. Otherwise, we risk squandering policy credibility with respect to the 2% inflation target.”
“In my view, getting underway with the removal of accommodation was appropriate given the strong real economy and the ongoing inflation shock. I believe that the FOMC should raise the policy rate to 3% by the end of the year and implement a plan to quickly reduce the size of the Fed’s balance sheet. Going forward, the extent and pace of these actions can be adjusted if macroeconomic conditions evolve differently than we expect today. And, of course, we must monitor risks, such as developments in the Russia-Ukraine war and their potential impact on the U.S. economy and inflation.”
Esther L. George – Kansas City Fed President – Hawkish
March 30
From Bloomberg (here). Recognizing risks to the outlook “is not an argument for stalling the removal of accommodation, but it does suggest a steady, deliberate approach for the path of policy could provide space to monitor developments as they unfold,” George said Wednesday in prepared remarks to the Economic Club of New York. “It is clear that removing accommodation is required. How much and how aggressively accommodation should be removed is far more uncertain.”
“Given the state of the economy, with inflation at a 40-year high and the unemployment rate near record lows, moving expeditiously to a neutral stance of policy is appropriate,” said George, who votes on the FOMC this year. “At the same time, the factors I noted earlier, including monitoring risks, the responsiveness of activity to interest rate changes, and yield curve developments will be important guides to that pace in my view.”
“My view is that an inverted curve has implications for financial stability with incentives for reach-for-yield behavior,” George said. “An inverted yield curve also pressures traditional bank lending models that rely on net interest margins, or the spread between borrowing short and lending long. Community banks in particular rely on net interest margins to maintain their profitability.”
Loretta J. Mester – Cleveland Fed President – Neutral
No recent statements.
Fed Presidents with no voting power in 2022
Thomas I. Barkin – Richmond Fed President – Neutral
March 30
From Bloomberg (here – interview here). Federal Reserve Bank of Richmond President Thomas Barkin said he’s open to raising interest rates by half a percentage point at the Fed’s policy meeting in May, depending on how strong the U.S. economy is at that time.
“I’m open to it,” Barkin said Wednesday in a Bloomberg Television interview with Michael McKee. “I think the question — and we will make this decision when we get to the meeting in May — is how strong does the economy still look in terms of its ability to take rate increases and how high is inflation persisting. I’m looking at both of those and we’ll make our call in May.”
Barkin said it might take interest rates going above neutral — the level which neither speeds up nor slows down the economy which policy makers estimate lies around 2.4% — to bring down inflation.
“I think there is a real chance that is true,” he said. “As we get closer to neutral we can make that call.”
Raphael Bostic – Atlanta Fed President – Hawkish
March 30
From YouTube (interview here). Federal Reserve of Atlanta President Raphael Bostic talked at the University of Southern California’s George Washington Leadership Lecture Series. No changes from previous statments were reported. Bostic continued to signal a preference for 6 hikes this year, stressing the increasing uncertainty from the Ukrainian war and that if the Fed moves too quickly the economy could be harmed.
Mary C. Daly – San Francisco Fed President – Dovish
No recent statements.
Charles L. Evans – Chicago Fed President – Dovish
April 1
From Yahoo Finance (here). “My own baseline assessment is in line with the median projection, though given the great deal of uncertainty we face today, I am well aware that developments may transpire in a way that would cause me to alter my assessment,” Evans told the Prairie State College Foundation in Olympia Fields, Illinois on Friday.
“I think with that kind of timing, you get to neutral in my opinion in an adequately quick time frame,” he said. “And it gives us a chance to look at how inflation pressures and supply pressures might be easing.”
“Given all the uncertainty we face today, policy makers need to be cautious, humble, and nimble as we navigate the course ahead,” he said. “Monetary policy is not on a preset course: Each FOMC meeting’s decision will be based on an assessment of economic and financial conditions at the time, as well as the risks to the outlook,” he said, referring to the rate-setting Federal Open Market Committee.
“If monetary policy did not respond to these broader inflation pressures, we would see the expectation of continued high inflation become embedded in economic decisions, and we would have even harder work to do to rein it in,” he said. “So monetary policy must shift to removing accommodation in a timely fashion, which is what you’ve seen in the latest actions by and communications from the FOMC.”
Patrick T. Harker – Philadelphia Fed President – Hawkish
March 24
From CNBC (here). “What I’m looking for is a safe landing,” he told CNBC’s Sara Eisen during a “Power Lunch” interview. “It may be bumpy along the way. It was bumpy going up, it’s going to be bumpy coming down. We’ve all been on those planes. We land safely, but it would be a bit of a thrill ride. I don’t want that. So that’s why we’re being cautious and careful about how we implement policy.”
Harker cautioned against relying too much on one relationship [yield curve inversion] when trying to predict the future. “The evidence is mixed. If you look at the data, it clearly correlates with recessions. But causation is not very clear,” he said. “So we need to make sure that we’re looking at lots of different data.”
Harker said he thinks the Fed at its May meeting should increase its benchmark rate by only a quarter-percentage point, or 25 basis points. Markets, though, are expecting a hike of 50 basis points, and Harker said he remains open to the idea depending on the data. “I wouldn’t take it off the table,” he said of the higher move.
Neel Kashkari – Minneapolis – Dovish
No recent statements.