FED: Fed Speakers Adopt "Gradual" Approach Since December FOMC (1/2)

Fed speakers since the December FOMC meeting (see document here for full commentary) have unanimously backed a more patient approach to rate cuts than foreseen just a few months earlier.

• Several FOMC participants from across the Hawk-Dove spectrum called December’s decision to cut a “close call”, echoing what Chair Powell dubbed a “closer call” but ultimately the “right call” to cut rates by 25bp.
• No FOMC member expressed a preference for another rate cut in January, given an apparent reduction in downside risks to the labor market and some signs of stalling disinflation - with few to no signals of future cut timing.
• While several FOMC participants pointed to the need to get policy down to a more neutral stance, there were differing opinions about the pace and the distance to that point, with all pointing to a data-dependent approach.
• Several employed the use of the terms "gradual" (eg Daly, Collins, Schmid), "patient" (eg Collins), "very patient" (eg Hammack) in terms of the pace, with some senior leaders saying that while the baseline is that inflation is still on course to hit 2% with policy still in a somewhat restrictive stance, it could take more time to get there.
• On whether policy is restrictive and/or near neutral, there were multiple opinions: Bowman: "I also continue to be concerned that the current stance of policy may not be as restrictive as others may see it"; Hammack "policy is not far from a neutral stance"; Schmid [rates may be] "very close" to neutral. The December minutes noted however that “a substantial majority" saw the policy stance as "still meaningfully restrictive",
• The biggest dove on the Committee, Chicago’s Goolsbee, noted that “I believe we’re on path to 2% and over the next 12-18 months rates can still go down a fair amount”, but  he too said that his December projections showed fewer cuts than the September edition.
• The degree to which the impact of potential Trump administration policy shifts will impact upon the rate trajectory is not entirely clear, with FOMC participants largely adopting a wait-and-see approach. What we’ve heard so far suggests that expansionary fiscal policy and a reduction of immigration could be the most impactful for FOMC participants’ outlooks, with tariffs not necessarily leading to a sustained increase in inflation (eg Gov Waller).
• Most commentary came out prior to the largely softer-than-expected December PPI/CPI data out mid-January.