The Federal Reserve (Fed) will announce its December resolution at 3 a.m. Taiwan time on Thursday (15th). Nick Timiraos, a reporter from the Wall Street Journal (WSJ), who is recognized by the market as the “Fed’s megaphone”, knocked on Monday (12th). A wake-up call that the Federal Reserve is facing a hawk-dove confrontation, and people misjudge Fed Chairman Jerome Powell is a good guy.
Investors on Monday (12th) are optimistic that the U.S. consumer price index (CPI) in November will show that U.S. inflationary pressures are slowing down, pushing the Federal Reserve to slow down the pace of interest rate hikes since its meeting in December. The four major U.S. stock indexes on Monday It rose more than 1% across the board.
However, during the quiet period before the December Federal Open Market Committee (FOMC) meeting, “Wall Street Journal” (WSJ) reporter Nick Timiraos revealed on Monday that there is a situation of hawks and doves in the Federal Reserve. We face two thorny challenges, including “how high will the end-point rate of this round of rate hike cycle be, and how long will interest rates be kept at this level to curb inflation”.
At present, the Federal Reserve is splitting into two camps, the hawks and the doves, each with its own stand.
Doves such as Patrick Harker, President of the Federal Reserve Bank of Philadelphia, and Susan Collins, President of the Federal Reserve Bank of Boston, are worried that the Fed has raised interest rates sharply this year, leaving no time to assess the impact of interest rate hikes on the economy, and worried The dangers of an economic downturn.
Hawks worry that cutting interest rates prematurely will lead to a repeat of the policy mistakes of the 1970s. Hawks such as Fed Chairman Jerome Powell and Governor Christopher Waller worry regarding a resurgence of the wage and price spiral nightmare. Kansas City Federal Reserve Bank President Esther George even bluntly said it was unlikely that inflation would be brought down without a recession.
At the same time, Timiraos also mentioned that Powell has repeatedly said that he is more worried regarding the risk of “not doing enough” to fight inflation than the risk of doing too much, and that the Fed is trying to strike a balance to avoid “Unnecessary” economic pain.
Timiraos also singled out Minneapolis Fed President Neel Kashkari.
Kashkari was once a representative of the doves, but now he has voted for the hawks. “When a recession is triggered by the Fed’s tight monetary policy to curb inflation, the economy can recover very quickly,” Kashkari said in October.
Timiraos quoted Citigroup chief global economist Nathan Sheets as saying that Fed officials all expect the unemployment rate to rise, which might lead to a wider divergence in terminal interest rates.
Facing the current internal polarization of the Federal Reserve, how will Powell respond? Timiraos tweeted: “People really misjudge Bauer as a diplomat, a real good guy, a mediator, but that’s definitely not the case. Bauer will have a very clear point of view, and he is committed to doing it What the law requires, which is lower inflation.”
Timiraos believes that Powell tends to slow down the pace of interest rate hikes and wait for the consequences of a large rate hike to appear. The Fed will raise the terminal interest rate to around 5% before March next year, and then keep it at a high level for a longer period of time. It will not be too early Move to easing policy. If the Fed judges that the economic slowdown is not enough to reduce inflation sufficiently, the Fed will continue to raise interest rates at a traditional rate of 1 yard at a time.