FED: Kugler, Powell Caution Seen Keeping December Hold "Live" (3/3)
Most hawkish of all though was Gov Kugler (permanent voter) who is usually thought of as one of the more dovish members of the FOMC, but delivered a speech that takes a more hawkish bent than the message delivered at the November FOMC. The key is that she used the word "pause" to refer to a potential future action, which is something Powell didn't at the press conference. She said: "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."
Note that the two options she presented are to 1) pause or 2) continue cutting. When asked at the press conference about what it would take to "pause" in December, Chair Powell phrased things differently in terms of the balance of risks, calling the choice between moving "more quickly" or "slow[ing] the pace" of cuts:
Chair Powell's prepared remarks Thursday cemented the apparent hawkish shift since last week's meeting. While his main comments were taken largely verbatim from last week's press conference Q&A, the impact was more pronounced by the fact that he included these in his prepared remarks rather than making them off-the-cuff - and the likelihood that he was expressing his own personal views moreso than at the press conference (which tends to reflect the FOMC consensus).
The week ended with mode dovish comments by more dovish members - Boston's Collins (2025 voter) “I do see the policy stance as being in a restrictive place, and over time normalizing that, I think, is going to be important... We’re well-positioned to be really careful in assessing the data and making decisions about the pace, about the timing...[tells BBG TV she is not seeing new price pressures and that] “it’s important to stay the course.”
And the biggest dove on the Committee, Chicago's Goolsbee (2025 voter), noted “As long we keep making progress toward the 2% inflation goal, over the next 12 to 18 months rates will be a lot lower than where they are now." Even so, he noted “If there’s disagreement of what’s the neutral rate, it does make sense at some point to start slowing how rapidly we’re getting there", while also acknowledging that if the current rate of inflation persists, it's "too high".