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FOMC Reinforces Dovish Stance Post-CPI

FED
A few developments on the Fed front in the past 24 hours - beginning with Wednesday's tame January CPI print -have mostly put paid to lingering suspicions that the FOMC could be reconsidering its dovish monetary policy stance in light of fiscal stimulus and rising inflation expectations.
  • Chair Powell's speech to the Econ Club of NY echoed Jan FOMC press conference comments that the Fed would look through transient inflation in 2021; that actual rather than expected inflation will be the key to raising rates; and and that labor market improvements in themselves are insufficient to force a monetary policy tightening. No suggestion that Powell's tune is changing.
  • SF Daly's comments to the WSJ that the Fed is unlikely to taper asset purchases by end-2021, and that further stimulus as currently being discussed by Congress is not "going to overheat" the economy, should come as little surprise from a dove (and a voting one at that), but provides a salient update from a 2021 voter on FOMC perceptions of the current stimulus proposals.
  • The hawks don't exactly have the cavalry coming either in the form of new appointments: Axios reported late Weds that academic economist Lisa Cook could be nominated by the Biden admin for an open Fed Board seat. Per Axios, her "academic writing suggests she is a dove, meaning she's less concerned about inflation and more focused on improving labor market condition".
  • Note also that Biden as expected withdrew Judy Shelton's nomination last week - her views on the gold standard among other issues were considered unorthodox (and potentially hawkish).
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