Fed put is still lower than where we are
An update on the latest FOMC participants’ statements on inflation and possible path for monetary policy.
We have heard from: Powell, Williams, Bullard, George, Barkin, Evans, Harker, and Kashkari.
Keep in mind
We have heard from several participants, including the Chair. The main takeaway remains the same: inflation is the primary concern and the FOMC seems committed to do whatever it takes.
The Chair words are clear. Unless there “is clear and convincing evidence that inflation pressures are abating and inflation is coming down”, monetary policy will not become less aggressive. In fact, the Chair reiterated that if controlling inflation “involves moving past broadly understood levels of neutral we won’t hesitate to do that”.
Markets are testing the Fed put. But it’s probably still lower than where we are given the inflation outlook.
FOMC-meter
Dovish
Leal Brainard
John Williams
Charles Evans
Mary C. Daly
Neel Kashkari
Neutral
Jerome H. Powell
Michelle W. Bowman
Thomas I. Barkin
Raphael Bostic
Hawkish
Christopher Waller
James Bullard
Esther L. George
Loretta J. Mester
Patrick T. Harker
Note: FOMC voters are bolded.
Recent FOMC participants' statements - most recent statements in blue
Jerome H. Powell – Chair – Neutral
May 17
From CNBC (here). “If that involves moving past broadly understood levels of neutral we won’t hesitate to do that,” the central bank leader told The Wall Street Journal in a livestreamed interview. “We will go until we feel we’re at a place where we can say financial conditions are in an appropriate place, we see inflation coming down.
“We’ll go to that point. There won’t be any hesitation about that,” he added.
“You’d still have a strong labor market if unemployment were to move up a few ticks. I would say there are a number of plausible paths to have a soft as I said softish landing. Our job isn’t to handicap the odds, it’s to try to achieve that,” he said.
He added that “there could be some pain involved to restoring price stability” but said the labor market should remain strong, with low unemployment and higher wages.
From NY Times (here). “What we need to see is clear and convincing evidence that inflation pressures are abating and inflation is coming down — and if we don’t see that, then we’ll have to consider moving more aggressively,” Mr. Powell said, speaking Tuesday afternoon on livestream hosted by The Wall Street Journal. “If we do see that, then we can consider moving to a slower pace.”
While Mr. Powell emphasized the economic outlook is very uncertain, he and his colleagues have suggested that they want to push interest rates up to a neutral setting — a place where they are neither stoking nor slowing growth — “expeditiously.” But Mr. Powell suggested that officials are willing to raise rates beyond that if it is necessary to do so to control inflation.
“We won’t hesitate at all to do that,” he said. “We will go until we feel like we’re at a place where we can say, ‘Yes, financial conditions are at an appropriate place, we see inflation coming down.’”
From Bloomberg (here). “We all read — of course, everyone reads — the inflation reports very carefully, and looks for details that look positive, and that kind of thing,” he said. “But truthfully, we don’t — this is not a time for tremendously-nuanced readings of inflation.”
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
May 16
From Reuters (here). Williams said the $35 billion monthly target for MBS redemptions may prove harder to reach each month. “That’s a pretty big number,” Williams said. “Our own forecasts are that we wouldn’t see $35” billion every month especially now that the jump in interest rates on mortgages has dramatically slowed refinancing activity.
“Getting monetary policy in the right place to bring balance back to the economy and bring inflation down … that’s the job we’re focused on,” he said.
Fed Presidents with voting power in 2022
James Bullard – St. Louis Fed President – Hawkish
May 20
From Bloomberg (here).“I have also said we should get to 3.5% by the end of the year, which is higher than some of my colleagues,” Bullard said in a Fox Business interview Friday. “The more we can front-load and the more we can get inflation and inflation expectations under control, the better off we will be. In out years — ‘23 and ‘24 — we could be lowering the policy rate because we got inflation under control.”
“We have to get inflation under control, and I think we have a good plan to do so,” Bullard said. “Fifty basis points is a good plan for now. As always, we have to pay attention to incoming data on the economy and on inflation. You can never make ironclad promises in this business, but we will see how this goes.”
Esther L. George – Kansas City Fed President – Hawkish
May 19
From Bloomberg (here). “Right now, inflation is too high and we will need to make a series of rate adjustments to bring that down,” she said. “We do see financial conditions beginning to tighten so I think that’s something we’ll have to watch carefully. It’s hard to know how much will be needed.”
“I am very comfortable right now doing 50 basis points,” George said, adding that plans to shrink the Fed’s $8.9 trillion balance sheet will contribute to a tighter policy. “Moving deliberately, making sure we stay on course to get some of those rate increases into the economy and then watch how that is unfolding is going to be really the focus of my attention.”
‘’I think we are good at 50 basis points,” she added. “I would have to see something very different to say we need to go further than that.”
“For me, what’s more important is at what point will we see inflation level out and then begin to decelerate,” she said. “That I think will tell us something about where we need to go with monetary policy.”
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
No recent statements.
Raphael Bostic – Atlanta Fed President – Neutral
No recent statements.
Mary C. Daly – San Francisco Fed President – Dovish
No recent statements.
Charles L. Evans – Chicago Fed President – Dovish
May 18
From Bloomberg (here). “If we go 50 basis points beyond that [neutral, n.d.r.], if we go 75 basis points beyond that, then that restrictive setting of policy should be working to bring inflation down,” Evans said Wednesday in a Bloomberg Television interview with Michael McKee.
“We don’t have to constantly increase the funds rate to be restrictive. We can get to a restrictive setting and sit there for a while,” he said, referring to the central bank’s benchmark rate.
“As Chair Powell said, we’re going to be moving expeditiously towards something much more like a ‘neutral’ fed funds rate. My own assessment of ‘neutral’ is in the 2.25-2.5% range,” Evans said.
“I would expect by the end of this year, it could be quite likely that we were at a neutral setting, and I think we would be very well-positioned to address the future inflationary pressures of 2023,” he said. “I’m expecting things to improve from the very-high inflation that we’re having, but I do think it’s going to take us some time to take care of this.”
Patrick T. Harker – Philadelphia Fed President – Hawkish
May 18
From Reuters (here). “We may have a few quarters of negative growth, but again, that’s not what I’m estimating, what I’m forecasting right now,” Harker said in a virtual event with the Mid-Size Bank Coalition of America, adding the economy can withstand a “measured” and “methodical” tightening of financial conditions that would bring down demand. “We don’t want to overdo it, but we have to act.”
From Reuters (here). “I anticipate a sequence of increases in the funds rate at a measured pace until we are confident that inflation is moving toward the Committee’s inflation target.”
“I still am in the camp that we can have, if not a soft landing, a safe landing,” Harker said, noting the strength of the labor market, with nearly two jobs open for every American jobseeker, and an unemployment rate of 3.6%.
The U.S. economy will likely grow between 2% and 3% this year, he said, adding, “this economy can withstand a measured, methodical approach to tightening financial conditions.”
Neel Kashkari – Minneapolis – Dovish
May 17
From Reuters (here). “The question right now that I’m asking myself, and that I’m asking my economists that I work with is, do we just have to follow through on what we’ve promised – is that going to be enough – or are we going to have to do even more?” Kashkari told the Sault Ste. Marie Chamber of Commerce in Michigan. “And I don’t know the answer to that.”
“My colleagues and I are going to do what we need to do to bring the economy back into balance,” Kashkari said. “What I don’t know is how much are we going to need to do … if we get some help on the supply side, then we won’t have to do as much; if we don’t get any help on the supply side, we are going to have to do more.”