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FED: Barkin Doesn’t Push Back On Growing Pause Rhetoric

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The above comments from Richmond Fed's Barkin (a ’24 voter so with only the Dec 17-18 meeting left to have a direct impact) somewhat echo an increasing collection of Fed officials hinting at a decision between cutting another 25bp in Dec or pausing. He doesn’t want to “prejudge” the Dec meeting, but data currently suggests the economy is “quite prosperous”. Markets are broadly aligned to this view, with Fed Funds pricing 14bp of cuts for Dec, with data set to be in the driving seat until then. 

  • Gov. Kugler (voter) last week offered a more hawkish lean than the Nov FOMC message, of note for one of the more dovish members of the FOMC. She used the word "pause" to refer to a potential future action, which is something Powell didn't at the press conference. "If any risks arise that stall progress or reaccelerate inflation, it would be appropriate to pause our policy rate cuts. But if the labor market slows down suddenly, it would be appropriate to continue to gradually reduce the policy rate."
  • When asked at the FOMC press conference about what it would take to "pause" in Dec, Powell phrased the choice between moving "more quickly" or "slow[ing] the pace" of cuts.
  • Gov. Cook (voter) yesterday didn’t express clear support for a cut or hold in Dec, and as such her comments leaned hawkish given that she is generally considered to be dovish-leaning. She sounded largely aligned with Chair Powell's but notably used the word “pause” as with the case of Kugler.
  • Most interestingly: “If the labor market and inflation continue to progress in line with my forecast, it could well be appropriate to lower the level of policy restriction over time until we near the neutral rate of interest, or the point when monetary policy is neither stimulating nor restricting economic growth” – i.e. her baseline isn’t necessarily set on easing policy restriction.
  • Gov. Bowman (voter) yesterday took a typically hawkish stance, in a speech titled "Approaching Policymaking Pragmatically". That "pragmatism", she says, is consistent with "a flexible, data-dependent approach, providing the Committee with optionality in deciding future policy adjustments." If anything, it seems like many on the FOMC have moved more toward her viewpoint since her dissent to September's 50bp rate cut, which blunted market reaction to her comments.
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The above comments from Richmond Fed's Barkin (a ’24 voter so with only the Dec 17-18 meeting left to have a direct impact) somewhat echo an increasing collection of Fed officials hinting at a decision between cutting another 25bp in Dec or pausing. He doesn’t want to “prejudge” the Dec meeting, but data currently suggests the economy is “quite prosperous”. Markets are broadly aligned to this view, with Fed Funds pricing 14bp of cuts for Dec, with data set to be in the driving seat until then. 

  • Gov. Kugler (voter) last week offered a more hawkish lean than the Nov FOMC message, of note for one of the more dovish members of the FOMC. She used the word "pause" to refer to a potential future action, which is something Powell didn't at the press conference. "If any risks arise that stall progress or reaccelerate inflation, it would be appropriate to pause our policy rate cuts. But if the labor market slows down suddenly, it would be appropriate to continue to gradually reduce the policy rate."
  • When asked at the FOMC press conference about what it would take to "pause" in Dec, Powell phrased the choice between moving "more quickly" or "slow[ing] the pace" of cuts.
  • Gov. Cook (voter) yesterday didn’t express clear support for a cut or hold in Dec, and as such her comments leaned hawkish given that she is generally considered to be dovish-leaning. She sounded largely aligned with Chair Powell's but notably used the word “pause” as with the case of Kugler.
  • Most interestingly: “If the labor market and inflation continue to progress in line with my forecast, it could well be appropriate to lower the level of policy restriction over time until we near the neutral rate of interest, or the point when monetary policy is neither stimulating nor restricting economic growth” – i.e. her baseline isn’t necessarily set on easing policy restriction.
  • Gov. Bowman (voter) yesterday took a typically hawkish stance, in a speech titled "Approaching Policymaking Pragmatically". That "pragmatism", she says, is consistent with "a flexible, data-dependent approach, providing the Committee with optionality in deciding future policy adjustments." If anything, it seems like many on the FOMC have moved more toward her viewpoint since her dissent to September's 50bp rate cut, which blunted market reaction to her comments.