50bps hike train: all on board
An update on the latest FOMC participants’ statements on inflation and possible path for monetary policy.
We have heard from: Brainard, Waller, Williams, Bullard, Mester, Barkin, Evans, and Harker.
Keep in mind
As discussed shortly after the CPI release, the small downward surprise in core prices did not make any difference for the Fed because under the surface price pressures are still rising.
Consequently, all participants sounded very hawkish, confirming their support (or willingness to discuss) 50bps hike at the next FOMC. On this point, we find the words of participants traditionally dovish to be particularly relevant: Williams (“I think that’s [50bps hike] a reasonable option for us”) and Evans (“I can certainly see the case”).
At this point, all participants (especially among voters) seem to be on board: 50bps hike in May to begin, another 50bps in June (and possibly July) to follow.
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 – Neutral
No recent statements.
Lael Brainard – Governor – Dovish
April 12
From Bloomberg (here). “We are doing that [reducing inflation] by tightening monetary policy methodically, and it is through a series of interest rate increases as well as beginning that balance sheet runoff,” Brainard said Tuesday in a live-streamed interview at a Wall Street Journal jobs summit.
“In terms of exactly what the right pace of that set of increases in the policy rate from meeting to meeting, I don’t really want to focus on that,” she said. “But I would just say the combined effect will bring the policy stance to a more neutral posture expeditiously later this year,” she added, referring to the level of rates that neither speed up nor slow down the economy.
Christopher J. Waller – Governor – Hawkish
April 13
From Bloomberg (here). “I prefer a front-loading approach. So a 50 basis-point hike in May would be consistent with that and possibly more in June and July.” Waller said in an interview with CNBC Television on Wednesday. “We want to get above neutral certainly by the later half of this year and we need to get closer to neutral as soon as possible.”
Waller said that it is “completely feasible” the Fed can slow demand without triggering a recession because the economy is so strong. “This is a good time to do kind of aggressive action because the economy can take it,” Waller said.
“I don’t see any value in trying to shock the markets; we are not in a Volcker kind of moment,” he said, referring to former Chair Paul Volcker who battled double-digit inflation in the late 1970s and early 1980s that had become entrenched.
Michelle W. Bowman – Governor – Neutral
No recent statements.
John C. Williams – New York Fed President – Dovish
April 14
From Bloomberg (here). Speeding up the pace of interest-rate increases to include hikes in increments of a half-percentage point is a “reasonable option” for the Federal Reserve given how low rates are now, New York Fed President John Williams said.
“I think that’s a reasonable option for us because the federal funds rate is very low,” Williams said Thursday in a Bloomberg Television interview with Michael McKee. “We do need to move policy back to more neutral levels.”
“We need to really focus on bringing inflation down to our 2% longer-run goal, and to do that over the next few years. So, that is the number-one focus, and I say that because the economy is strong,” Williams said. “So I do think from a monetary policy point of view, it does make sense for us to move expeditiously towards more-normal levels of the federal funds rate.”
“I think the economy can withstand real interest rates at neutral or a bit above,” he said. “We’ve seen a dramatic, significant movement in yields and financial conditions over the past several months and that’s already positioning policy well to get supply and demand back into balance.”
Fed Presidents with voting power in 2022
James Bullard – St. Louis Fed President – Hawkish
April 13
From FT (here). Bullard said the central bank would need to get beyond that threshold as quickly as possible this year if it wanted to bring inflation closer to the Fed’s longstanding 2 per cent target. “There’s a bit of a fantasy, I think, in current policy in central banks,” Bullard said in an interview with the Financial Times. “Neutral is not putting downward pressure on inflation. It’s just ceasing to put upward pressure on inflation.” “We have to put downward pressure on the component of inflation that we think is persistent,” he added. “Getting to neutral isn’t going to be enough it doesn’t look like, because while some of the inflation may moderate naturally . . . there will be a component of it which won’t.”
“If markets and households get the idea that the Fed’s not going to do the right thing and not going to keep inflation under control, then you have to gain credibility by actually doing things that show them that you are serious,” he said.
“So far I think we’re holding on to our credibility, but if it slips away, then it’s going to be much more difficult to keep inflation under control going forward.”
Esther L. George – Kansas City Fed President – Hawkish
No recent statements.
Loretta J. Mester – Cleveland Fed President – Neutral
April 10
From Reuters (here). By making home, auto and other loans more expensive, Fed interest rate increases and other actions “will help reduce excess demand, which is outpacing constrained supply, and bring price pressures down,” to the Fed’s 2% inflation target, Mester said. “I think it will take some time. … Inflation will remain above 2% this year and even next year. But the trajectory will be moving down.”
“I think we can reduce excess demand relative to supply without pushing the economy into recession,” Mester said. “It is very important that we get inflation under control. That is the biggest challenge right now.”
Fed Presidents with no voting power in 2022
Thomas I. Barkin – Richmond Fed President – Neutral
April 12
From Reuters (here). If bouts of high inflation become more common in the future than they were pre-pandemic, Barkin said, “our efforts to stabilize inflation expectations could require periods where we tighten monetary policy more than has been our recent pattern.”
“The best short-term path for us is to move rapidly to the neutral range and then test whether pandemic-era inflation pressures are easing, and how persistent inflation has become,” he said, speaking remotely at a Money Marketeers event in New York. “If necessary, we can move further.”
From Reuters (here).“How far we will need to raise rates, in fact, won’t be clear until we get closer to our destination, but rest assured we will do what we must to address this recent bout of above-target inflation,” Barkin said in remarks prepared for delivery to the Money Marketeers in New York. “The best short-term path for us is to move rapidly to the neutral range and then test whether pandemic-era inflation pressures are easing, and how persistent inflation has become. If necessary, we can move further.”
Raphael Bostic – Atlanta Fed President – Hawkish
No recent statements.
Mary C. Daly – San Francisco Fed President – Dovish
No recent statements.
Charles L. Evans – Chicago Fed President – Dovish
April 11
From Bloomberg (here). A half-percentage point increase in the Fed’s benchmark rate “is obviously worthy of consideration,” when Fed officials next meet to decide policy in May, Evans said Monday during an event in Detroit. “Perhaps it’s highly likely, even,” he said.
“If you want to get to neutral by December, that would probably require something like nine hikes this year, and you’re not going to get that if you just do 25 at each meeting,” Evans said. “So, I can certainly see the case.”
“I would say where the dollar is at the moment is indicative of the fact that U.S. monetary policy is pivoting towards a more neutral setting, and we’re going to be doing that quicker than many of our counterparts,” he said. “But I haven’t seen anything that seems out of line relative to sort of my expectations of where monetary policy is going right now.”
Patrick T. Harker – Philadelphia Fed President – Hawkish
April 14
From Reuters (here). Philadelphia Federal Reserve President Patrick Harker on Thursday repeated his view that the U.S. central bank will deliver “a series of deliberate, methodical hikes” to interest rates this year to bring down widespread and “far too high” inflation.
“While the Fed cannot do much to ameliorate the supply issues that are increasing inflation, we can begin to affect demand,” Harker said in remarks prepared for delivery at Rider University in Lawrence Township, New Jersey.
Neel Kashkari – Minneapolis – Dovish
No recent statements.