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FED: FOMC Rate Hike Sentiment Is Subdued ... But It's Starting To Bubble Up

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Since the January meeting, we've detected a further shift to the hawkish end of the spectrum across the FOMC, in particular since the employment report on Feb 7. 

  • Two of the FOMC's most hawkish members have very subtly speculated about a possible rate hike as the Fed's next move.
  • Cleveland Fed President Hammack said today: "My base case is that we're going to be on hold for quite some time... while it's not my base case that we would raise rates this year, there's a lot of uncertainty there about about a broad swath of policies, and so we'll need to be mindful of what all of those are and what those impacts are before making those decisions."
  • This follows Dallas Fed President Logan who very subtly pointed to a scenario that might in fact include rate hikes: "In some scenarios, it will soon be appropriate to resume reducing the federal funds target range. In other scenarios, we'll need to hold rates at least at the current level for quite some time." Note the "at least", which is about as far as you can go to implying potential rate hikes are possible without explicitly saying so.
  • Gov Bowman, who is also among the most hawkish members, hasn't quite gone that far but is yet to be convinced that rate cuts lie ahead. Though she could plausibly move in that direction depending on the data  ("I would like to see progress in lowering inflation resume "), and had noted prior to the January payrolls data showing an unexpected drop to 4.0% unemployment that December's 4.1% rate was already  "slightly below my estimate of full employment".
  • Even Chair Powell sounded more hawkish on the labor market front after January's employment data, telling the Senate Banking Committee that the labor market was "very strong".
  • We still haven't heard from the other two biggest hawks - KC's Schmid and St Louis's Musalem - since the January FOMC. Both of them are 2025 voters and could really start to ratchet up rate hike talk if they begin using the same rhetoric of their hawkish colleagues.
  • Musalem speaks at the Economic Club of New York on February 20, while Schmid has no scheduled appearances before the March FOMC blackout begins March 8.
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Since the January meeting, we've detected a further shift to the hawkish end of the spectrum across the FOMC, in particular since the employment report on Feb 7. 

  • Two of the FOMC's most hawkish members have very subtly speculated about a possible rate hike as the Fed's next move.
  • Cleveland Fed President Hammack said today: "My base case is that we're going to be on hold for quite some time... while it's not my base case that we would raise rates this year, there's a lot of uncertainty there about about a broad swath of policies, and so we'll need to be mindful of what all of those are and what those impacts are before making those decisions."
  • This follows Dallas Fed President Logan who very subtly pointed to a scenario that might in fact include rate hikes: "In some scenarios, it will soon be appropriate to resume reducing the federal funds target range. In other scenarios, we'll need to hold rates at least at the current level for quite some time." Note the "at least", which is about as far as you can go to implying potential rate hikes are possible without explicitly saying so.
  • Gov Bowman, who is also among the most hawkish members, hasn't quite gone that far but is yet to be convinced that rate cuts lie ahead. Though she could plausibly move in that direction depending on the data  ("I would like to see progress in lowering inflation resume "), and had noted prior to the January payrolls data showing an unexpected drop to 4.0% unemployment that December's 4.1% rate was already  "slightly below my estimate of full employment".
  • Even Chair Powell sounded more hawkish on the labor market front after January's employment data, telling the Senate Banking Committee that the labor market was "very strong".
  • We still haven't heard from the other two biggest hawks - KC's Schmid and St Louis's Musalem - since the January FOMC. Both of them are 2025 voters and could really start to ratchet up rate hike talk if they begin using the same rhetoric of their hawkish colleagues.
  • Musalem speaks at the Economic Club of New York on February 20, while Schmid has no scheduled appearances before the March FOMC blackout begins March 8.