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Comment: If Esther George is saying a pause …

Comments from Fed policymakers have been prevalent in the news in the last few weeks, including Chair Jerome Powell and Vice Chair Richard Clarida. The message has been one of increasing caution regarding the outlook for further rate hikes. The words “patient” and “data dependent” have dominated the rhetoric.

Now Kansas City Fed President Esther George has joined in that chorus. George has been one of the most consistently hawkish policymakers in regard to increasing rates in recent years.  However, just as she is poised to re-enter the rotation of FOMC voters at the January 29-30 meeting, comes the first public comment on her policy outlook.

Remarks delivered by George on Tuesday, January 15 said, “Has the FOMC raised rates back to a neutral or normal level so that they are no longer either stimulating or restraining economic activity? Have we reached the proverbial soft landing where the economy has achieved maximum employment, stable prices, growth at potential and monetary policy neutrality? In my view, we are not there just yet. However, we are close, and for now, it seems to me that we should proceed with caution and be patient as we approach our destination.” [emphasis added]

If George is suggesting a pause in the pace of removing interest rate accommodation, you can probably be confident that the consensus — if not the whole FOMC — is prepared to put off further rate hikes for some time yet.

George’s fellow voting Presidents in 2019 will be Chicago’s Charles Evans who is a reliable inflation dove, Boston’s Eric Rosengren who tends to turn cautious when the real estate market looks shaky, St. Louis’ James Bullard who has been advocating for a hold in interest rate hikes for some while, and New York’s John Williams whose moderate views have always been tempered by the economic data.

There won’t be another look at FOMC’s Summary of Economic Projections (SEP) until after the March 19-20 FOMC deliberations. However, with the start on January 30 of the Chair’s press briefing to follow every FOMC meeting, there should be an opportunity to indicate if the FOMC’s consensus for rate hikes has softened as a whole.


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