Two Fed regional presidents staked out different concerns on the same day. Chicago Fed's Austan Goolsbee said his biggest short-run fear is that inflation isn't under control, while Kansas City Fed's Jeffrey Schmid argued current interest rates aren't restraining the economy at all. Traders are pricing just a 35% chance of a September rate hike as they wait on the next inflation print.
Chicago Fed President Austan Goolsbee said his biggest short-run fear is that inflation isn't under control, even as he described the broader economy as stable on balance. He called the current low-hire, low-fire labor market unusual and warned that political pressure on the Fed puts him on edge, arguing that political interference in central banks generally leads to inflation. Goolsbee has pushed for rate hikes for some time.
Schmid says rates aren't restrictive
Kansas City Fed President Jeffrey Schmid took a hawkish tone for a different reason. He said current interest rates are not restraining the US economy and that it's unclear what rate setting would be needed to bring inflation back to the Fed's 2% target. He added that he would have supported a rate hike at the July meeting, though he wasn't a voter at the time and won't be again until 2028.
Schmid dismissed talk of eroded Fed independence, saying the US midterm elections won't influence the Fed's October decision and that the central bank's credibility hasn't been damaged in recent weeks. He also warned that energy costs are beginning to spill into the economy, which could call for tighter policy, and said he'd welcome having fewer scheduled FOMC meetings.
Markets wait on the next data point
Schmid's comments didn't move markets, since his hawkish stance is already well known, according to Investinglive. Traders are currently pricing just a 35% probability of a rate hike in September, a figure that will hinge on US-Iran developments, an upcoming speech from Fed Chair Warsh, and the next US CPI report due September 11.
Sources: Investinglive, Investinglive
Trading involves risk.
Risk Disclaimer
