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FED: Gov Cook Mentions "Pause", Unsure About Hitting Neutral In Base Case

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Gov Cook doesn't express clear support for a cut or hold in December in her "Economic  Outlook" speech (link), and as such her comments lean hawkish given that she is generally considered to be dovish-leaning. While she sees the "totality of the data" as suggesting a "disinflationary trajectory is still in place and that the labor market is gradually cooling" and "I see employment risks as weighted to the downside", she also says "those risks [to employment] appear to have diminished somewhat in recent months".

  • Her commentary sounds largely aligned with Chair Powell's, but she notably uses the word "pause" in describing a possible course of action, a term her Board of Governors colleague Kugler also mentioned as part of a hawkish shift in FOMC rhetoric last week.
  • Interestingly, even in her core scenario for inflation and employment, she only goes so far as to say "it could well be appropriate to lower the level of policy restriction over time" - rather than saying something like "it would likely be appropriate". Overall this suggests that the December meeting is "live" either way and reinforces that the FOMC has shifted to a more cautious stance this month. Key quotes:
  • "It likely will be appropriate to move the policy rate toward a more neutral stance over time... Going forward, I still see the direction of the appropriate policy rate path to be downward, but the magnitude and timing of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks. I do not view policy as being on a preset course."
  • On scenarios, including a possible "pause": "I am ready to respond to a changing outlook. In fact, I find it helpful to consider a range of scenarios when thinking about the path of policy. 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. However, if inflation progress slows and the labor market remains solid, I could see a scenario where we pause along the downward path. Alternatively, should the labor market weaken in a substantial way, it could be appropriate to ease policy more quickly."
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Gov Cook doesn't express clear support for a cut or hold in December in her "Economic  Outlook" speech (link), and as such her comments lean hawkish given that she is generally considered to be dovish-leaning. While she sees the "totality of the data" as suggesting a "disinflationary trajectory is still in place and that the labor market is gradually cooling" and "I see employment risks as weighted to the downside", she also says "those risks [to employment] appear to have diminished somewhat in recent months".

  • Her commentary sounds largely aligned with Chair Powell's, but she notably uses the word "pause" in describing a possible course of action, a term her Board of Governors colleague Kugler also mentioned as part of a hawkish shift in FOMC rhetoric last week.
  • Interestingly, even in her core scenario for inflation and employment, she only goes so far as to say "it could well be appropriate to lower the level of policy restriction over time" - rather than saying something like "it would likely be appropriate". Overall this suggests that the December meeting is "live" either way and reinforces that the FOMC has shifted to a more cautious stance this month. Key quotes:
  • "It likely will be appropriate to move the policy rate toward a more neutral stance over time... Going forward, I still see the direction of the appropriate policy rate path to be downward, but the magnitude and timing of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks. I do not view policy as being on a preset course."
  • On scenarios, including a possible "pause": "I am ready to respond to a changing outlook. In fact, I find it helpful to consider a range of scenarios when thinking about the path of policy. 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. However, if inflation progress slows and the labor market remains solid, I could see a scenario where we pause along the downward path. Alternatively, should the labor market weaken in a substantial way, it could be appropriate to ease policy more quickly."