Fed’s Williams is on board
An update on the latest FOMC participants’ statements on inflation and possible path for monetary policy.
We have heard from: Williams, Mester, Barkin, Bostic, Kashkari, and Logan.
Keep in mind
Last week all participants confirmed that the FF rate path they have in mind is close to the model-based prediction: raise the FF rate to 4%-ish and keep it there for few quarters to avoid the mistakes of the past. Notably, for the first time NY Fed President Williams publicly supported the idea of raising the FF rate and keep it elevated for some time.
As previously communicated, we think FOMC participants are genuine in their communication and that they will deliver. Having said so, the impression is that they are so committed (see for instance Mester’s words) that they will not stop should the US economy show signs of a significant slowdown.
For this reason, the FOMC might end up over doing it. In a sense, they have no choice because given the distribution of risks, doing too much is safer than doing too little. As such, by analyzing the incoming data and running model simulations we should have plenty of time to anticipate their next turning point.
Jerome H. Powell – Chair – Neutral
No recent statements.
Lael Brainard – Governor – Dovish
No recent statements.
Michael S. Barr – Governor – Neutral
No recent statements.
Christopher J. Waller – Governor – Hawkish
No recent statements.
Michelle W. Bowman – Governor – Neutral
No recent statements.
Lisa D. Cook – Governor – Neutral
No recent statements.
Philip N. Jefferson – Governor – Neutral
No recent statements.
John C. Williams – New York Fed President – Dovish
August 30
From Bloomberg (here). “We need to have somewhat restrictive policy to slow demand and we’re not there yet,” Williams said. The size of the move at the Fed’s move at its Sept. 20-21 meeting will depend on the “totality” of the data, he said, echoing Chair Jerome Powell’s comment.
From CNBC (here). “We’re going to need to have restrictive policy for some time,” he said in a live interview. “This is not something we’re going to do for a very short period and then change course.” “I do think with demand far exceeding supply, we do need to get real interest rates … above zero,” Williams said. “We need to have somewhat restrictive policy to slow demand, and we’re not there yet.”
Fed Presidents with voting power in 2022
James Bullard – St. Louis Fed President – Hawkish
No recent statements.
Susan M. Collins – Boston Fed President – Neutral
No recent statements.
Esther L. George – Kansas City Fed President – Hawkish
No recent statements.
Loretta J. Mester – Cleveland Fed President – Neutral
August 31
From Bloomberg (here). “My current view is that it will be necessary to move the fed funds rate up to somewhat above 4% by early next year and hold it there,” Mester said Wednesday in remarks prepared for an event organized by the Dayton Area Chamber of Commerce. “I do not anticipate the Fed cutting the fed funds rate target next year.”
Mester likewise reserved judgment. “The size of rate increases at any particular FOMC meeting and the peak fed funds rate will depend on the inflation outlook,” she said, referring to the policy-setting Federal Open Market Committee.
“Even if the economy were to go into a recession, we have to get inflation down,” Mester said while answering questions from the audience after her speech.
Mester said she expects inflation to move down to a range of 5% to 6% this year and to “make more progress” toward the Fed’s goal over the next two years. But that will only happen if the Fed continues raising interest rates, she said.
“This is going to be a long fight,” Mester said. “This is not a ‘one-and-done’ situation. We’ve got to bring it, continue to raise interest rates.”
Fed Presidents with no voting power in 2022
Thomas I. Barkin – Richmond Fed President – Neutral
August 30
From Bloomberg (here). “We’re committed to returning inflation to our 2% target and we’ll do what it takes to get there,” Barkin said Tuesday. “I’d expect inflation to bounce around on the way back to our target,” he told the Huntington Regional Chamber of Commerce in Huntington, West Virginia.
“A recession is obviously a risk in the process,” of cooling inflation, Barkin said, who does not vote on policy this year. “It doesn’t have to be like a 2008 recession, it doesn’t have to be calamitous.”
Barkin said that monetary policy acts with a lag, “so I don’t expect inflation to come down immediately,” “The Fed’s responsibility is to act to reduce inflation,” he said. “And we are.”
Raphael Bostic – Atlanta Fed President – Neutral
August 30
From Bloomberg (here). “Incoming data — if they clearly show that inflation has begun slowing — might give us reason to dial back from the hikes of 75 basis points that the Committee implemented in recent meetings. We will have to see how those data come in,” Bostic said in an essay posted on the bank’s Website Tuesday.
At the same time, Bostic said the Fed can’t afford to stop raising rates before bringing inflation back to the Fed’s target, even if the result is higher unemployment for a time.
“History is instructive on this point,” Bostic said. “What economists have come to call stop-and-go monetary policy—tightening in the face of rising inflation but then reversing course abruptly when unemployment rises—arguably helped to fuel inflation during the late 1960s and 1970s.”
“This summer’s data showed glimmers of good news on the fight against inflation,” Bostic said. “The key word here is ‘glimmers.’ It is clearly much too early to claim victory.”
Mary C. Daly – San Francisco Fed President – Dovish
No recent statements.
Charles L. Evans – Chicago Fed President – Dovish
No recent statements.
Patrick T. Harker – Philadelphia Fed President – Hawkish
No recent statements.
Neel Kashkari – Minneapolis – Dovish
August 31
From Reuters (here). “I was actually happy to see how Chair Powell’s Jackson Hole speech was received,” Kashkari told Bloomberg’s Odd Lots podcast. “People now understand the seriousness of our commitment to getting inflation back down to 2%.”
Lorie K. Logan – Dallas – Neutral
September 1
From Bloomberg (here). “Our number one priority has to be to restore price stability,” she told a virtual town hall Wednesday hosted by her bank.
From Reuters (here). “The theme was very clear… the clear priority was bringing inflation down, because it’s having significant implications and hardships for businesses and households,” Logan said. “And that really lines up with my own priority.”