Federal Reserve Commentary

 

8th August 2018

 

Fed’s Barkin (Voter) says the Fed should continue to raise rates and that the Fed’s benchmark rate is not yet at its normal level

 

  • Says tariffs concerns are rising and the economy is facing risks from geopolitics, market volatility and higher interest rates effects

  • Labour market is very tight and inflation at target 

  • If economy needs stimulus in future, the Fed might need to use unconventional policies like those used following the great depression.

  • Says growth is critical to the future as it creates more room to hike rates

  • says gradual rate increases are sensible, and tit-for-tat tariffs are likely to cancel out in terms of effect on US inflation, adding he can imagine pausing hikes at some point or keep going

 

Source: Newswires

 

20th August 2018

 

Fed's Bostic (voter, dovish) says the economy no longer needs the stimulus it required before; the economy is doing pretty well, GDP is 'strong' and unemployment rate 'very very low' historically

 

  • Fed is worried about flatness of yield curve, it is not clear an inverted yield curve is a recession signal, but it is only one signal, and does not guarantee recession will occur.

  • Will not vote for anything which he believes will knowingly invert the yield curves

  • Fed is doing pretty well on its inflation objective  

  • Fed is on a gradual path to get rates back to neutral (3%)

  • Aim is to keep the balance sheet unwind running in the background

  • He says US debt level should ‘inform’ fiscal policymakers moving forward

  • Trade policy is a source of uncertainty for the US economy, it is the 'chief' source of uncertainty 

  • Fed is watching EM such as Turley and Venezuela

  • Independence allows for them to make better policy

  • Tax reform is an upside risk, Bostic still favours 3 hikes for 2018

 

Source: Newswires

 

Fed’s Kaplan (Non-Voter) says should raise interest rates gradually to a neutral level, sees 3 to 4 more hikes before the level is reached once that is reached he says he would be inclined to step back and assess the outlook

  • Central bank has met its goals and should raise interest rates gradually to the neutral level

  • Sees GDP growth at 3% this year

  • Yield curve suggests US in in a late stage of the economic cycle

  • Will watch the yield curve as he judges the pace of hikes

  • Expects to see higher oil prices over time

  • Will monitor for any impacts from global instability 

 

23rd August 2018

 

Fed's Kaplan says comfortable with 4 hikes this year and that officials will ignore political pressure or attacks

 

Source: Newswires

 

Fed's Kaplan says the job of the Fed is to make decisions independent of politics; says impact of trade dispute on the US economy is so far modest, but it could affect business sentiment.

 

- Kaplan hopes Fed can get to the neutral rate without seeing a yield curve inversion
- Kaplan sees 3-4 hikes in the next 9-12 months

 

Source: Federal Reserve

 

4th September 2018 

 

Fed's Bostic (Voter, Dove) says US economy is performing quite well, at full employment and with inflation at 2% goal, while he reiterates that economy is standing on its own and that monetary policy should be neutral

Says:
- Stimulus from US tax cut has not happened quickly as he expected.
- There is plenty of upside potential for household spending.
- Lack of clarity related to trade policy has forced some businesses to wait on investments.
- Upside and downside risks to the economy are almost perfectly balanced.

 

Source: Federal Reserve

 

6th September 2018 

 

Fed's William (voter, neutral) says lack of inflationary pressure means there is no need for Fed to raise rates faster; adding the Fed should not ignore the risk of yield curve inversion

 

Source: Newswires

 

Fed's Williams does not see the yield curve as a deciding factor in interest rate decisions

  • Also says no reason to believe the economy is on the edge of an increase in the neutral rate of interest

  • says some flattening of yield curve is normal in a tightening cycle but also due to central bank bond holdings

 

Source: Newswires

 

7th September 2018

 

Fed's Kaplan (Neutral, Non-voter) says we ought to be moving towards neutral interest rate and raising rates 3-4 times over the next 9-12 months

 

Fed's Rosengren says strengthening economy will likely need mildly restrictive policy and he would not be surprised if Fed forecasts for neutral rate and rate path shift upwards, adds no need to quicken pace of hikes & inflation justifies continued hikes

 

Source: Newswires

 

 

26th September 2018

 

Fed’s Powell sees positive signs of a strong economy; says gradual normalisation helping to sustain US economy

Says: 

  • Growth outlook remains favourable, fiscal stimulus is boosting economy

  • Overall financial conditions remain accommodative

  • Expects inflation to remain near 2% at sustained basis

  • Fed's Powell says if inflation surprises to the upside Fed would have to move quicker but he does not see that; slowing down in the economy or financial conditions will be something the Fed reacts to

  • Fed's Powell notes rates are still below the official estimates of neutral rate .

 

Source: Newswires

 

28th September 2018

 

Fed Chair Powell reiterates the US economy is strong, unemployment low and inflation stable, while adding gradual rate path is helping sustain the US economy.

 

-Says models suggest probability of recession in the next year or two are not elevated

 

Source: Newswires

 

1st October 2018

 

Fed's Rosengren says the further the US gets below full employment the higher the risk of inflation increasing

  • says there are a "bunch of yellow lights" including commercial real estate

  • says commercial rates are getting tight

 

Fed's Rosengren says FOMC should continue on its current pace of raising rates

 

Source: Newswires

 

3rd October 2018

 

Fed Chair Powell says gradual rates are meant to balance risks, "remarkably positive outlook" on inflation and employment

 

  • inflation and employment forecasts are "not too good to be true"

  • ready to act "with authority" if inflation expectations drift from their target

  • doesn't expect significant inflation rise but is taking risk seriously

  • rising wages do not point to an overheating labour market or inflation risk

  • key risks included needlessly foreshortening expansion and rising inflation, data shows US economy is in good shape

  • steady low inflation and low unemployment reflect "extraordinary times"

 

Source: Newswires

 

Fed Chair Powell says we are a long way from neutral rates, rates are still accomadative

  • when Powell was questioned about Trump, he said the Fed is focused on doing the right thing and did not speak with Trump after his comments

  • reiterates no impact yet seen from the trade disputes

  • says next downturn will not look like the last as risks are moderate

 

Source: Newswires