Could Powell now be a 'pigeon' within the Federal Reserve?
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发表于 2024-8-29 11:59:05
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With the Fed's September rate cut almost certain, people are now paying more attention to the pace of future rate cuts. At this critical moment, the position of Federal Reserve Chairman Powell within the Fed seems to be attracting increasing attention.
Last week, at the Global Central Bank Annual Meeting held in Jackson Hole, Wyoming, several Federal Reserve decision-makers explained the reasons why interest rate cuts should be made in a "gradual" or "orderly" manner. These Federal Reserve officials believe that, given that inflation has not fully cooled to the central bank's target of 2%, although the labor market is showing signs of fragility, considering that widespread layoffs have not yet occurred, this means that the Federal Reserve does not need to take relatively aggressive easing actions.
This is actually contrary to the current expectation of investors in the interest rate market that the Federal Reserve will make at least one large-scale interest rate cut this year - data from the interest rate swap market shows that traders currently expect the Fed to cut interest rates by at least 100 basis points this year, which means that in the remaining three interest rate meetings, the Fed will have at least one meeting with a direct 50 basis point cut!
Brett Ryan, a senior US economist at Deutsche Bank, said, "Orderly, gradual, and cautious - these are the words commonly used by decision-makers when reversing the situation. This will be a trial and error process, and they hope to adopt a slower approach
Undoubtedly, in the past, "gradualism" has been a policy change strategy adopted by the Federal Reserve during uncertain periods: many Fed officials would like to steadily cut interest rates by only 25 basis points each time.
However, some industry insiders have also noticed that Chairman Powell does not seem to be among the "chorus" supporting this prudent approach.
This Federal Reserve chairman is pinning his "great achievements" on the perfect scenario of suppressing inflation without causing serious impact on the job market. Last week, Powell made no mention of how he expects the Fed's actions after September in his highly anticipated speech at the Jackson Hole Conference.
Industry insiders have pointed out that compared to several other colleagues at the Federal Reserve, Powell seems more willing to take more aggressive measures in the rapidly deteriorating employment situation.
While making further progress towards price stability, we will make every effort to support a strong labor market, and we do not seek or welcome further cooling of labor market conditions, "Powell said on Friday.
Obviously, from the perspective of economic data, many dovish figures within the Federal Reserve are still most concerned about the situation in the job market - the US unemployment rate unexpectedly rose to 4.3% in July. Although employers have not yet laid off employees on a large scale, their recruitment pace has significantly slowed down. Powell and his colleagues have long believed that the hot job market has driven up wages, boosted the spending power of American consumers, and thus stimulated inflation. But Powell has recently made it clear that this effect has disappeared.
EY Parthenon economists Gregory Daco and Lydia Boussour said, "Powell seems more dovish than his colleagues, but unless the labor situation deteriorates significantly in the coming weeks, we still expect most policymakers to lean towards a 25 basis point rate cut in September
In addition to Powell, the position of another influential figure within the Federal Reserve - New York Fed President Williams - may also be worth investors' attention in the future. We introduced yesterday that the latest minutes of the Federal Reserve discount rate meeting released on Tuesday showed that board members of the Chicago Fed and the New York Fed voted in July to lower the discount rate by 25 basis points.
In the past, the minutes of discount rate meetings often provided clues and signals about the possible direction of the Federal Reserve's monetary policy. Therefore, some commentators also speculate that this means that the President of the New York Fed may have supported the Fed to lower interest rates as soon as possible in July (as for the Chicago Fed, it goes without saying that President Goolsby himself is a big dove).
Of course, renowned journalist Nick Timiraos, known as the "New Federal Reserve News Agency," does not actually agree with this statement.
Timiraos pointed out that typically, changes proposed by each regional Federal Reserve board are inferred as a signal of the bank president's support for a policy, as the board may follow the advice of the regional Federal Reserve chairman, with the exception of the New York Fed. In 2015, as the Federal Reserve prepared to make a highly anticipated decision to raise interest rates after seven years of near zero rates, the board recognized that, given that the New York Fed chairman was (and still is) one of the "Big Three" in FOMC policy making, a vote by the board to change the discount rate could lead to misunderstandings from the outside world. Therefore, the leadership of the New York Federal Reserve has decided that in order to avoid conveying any information regarding the chairman's policy views, the chairman will "abstain" from proposing a discount rate to the board of directors in advance.
However, regardless of whether Williams himself was not involved in the decision of the New York Fed to support a reduction in the discount rate, it is still worth noting whether the relatively dovish tendencies within the most important and influential reserve bank in the US Federal Reserve system will affect his own opinion.
In the past few years, Williams and Powell's positions and viewpoints have been extremely close. If these two have already formed a relatively dovish camp within the Federal Reserve, it is likely to have significant indicative significance for the direction of the Fed's decisions in the coming years.
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