Even though traders have gone all in on a rate cut for September, the odds of that outcome is still not really a given if judging by Fedspeak this week. Markets will be looking to pressure bully the Fed into making a move as they always have. However, Fed policymakers are looking a bit more hesitant or perhaps even resistant this time around.
Among the voting members this year, we saw Kansas City Fed president Schmid earlier this week say that he will dissent to a September rate cut even with the July inflation numbers. And yesterday, Chicago Fed president Goolsbee argued that he needs “more comfort on inflation”. But he did leave some flexibility in saying that every meeting will be live and that there is still time to for him to get on board with a rate cut before the September meeting.
As for the non-voting members, we did get Richmond Fed president Barkin note that the balance between inflation and unemployment is rather unclear currently. That before saying that he believes inflation pressures from tariffs will not be as high as one might think. And yesterday, we had Atlanta Fed president Bostic say that the central bank still has the “luxury to wait” on more data before committing to any policy adjustment.
Putting everything together, we have a bit of a mixed bag in there.
Besides that, there were comments from Fed governor nominee Miran in saying that there is no evidence whatsoever of tariffs inflation in the CPI numbers. If you compare that to Bullard’s comments that a 50 bps rate cut next month might look “panicky”, I think we know who won’t be getting the top job there. Gotta play the politics after all.
But when you cast aside the political biasness, there seems to be some reluctance by Fed policymakers in confirming market expectations and pricing at the moment. This week will still feature some notable US data with the PPI, weekly initial jobless claims, and retail sales yet to come.
However, the Fed really only has that much to work with before the Jackson Hole symposium comes along. After that, the only item left on the agenda is the next US labour market report on 5 September. The FOMC blackout period will then begin on 6 September.
That’s all but three weeks left for the Fed to shape market expectations before they decide on policy on 17 September. There is still the next US CPI report on 11 Septmber but that falls after the blackout period.
Coming up later today, we do have St Louis Fed president Musalem (voter) set to speak in an interview with CNBC as well as Richmond Fed president Barkin (non-voter) in a business webinar. So, do keep an eye out for that too.
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