Markets are on the defensive this morning as six Fed officials are speaking throughout the day. Every word will be parsed by analysts trying to determine the likelihood of a Fed rate hike in December.
St. Louis Fed president James Bullard started the day off on a hawkish note, saying “prudence alone” indicates that the Fed should not only be raising rates from near-zero, but also shrinking its balance sheet. (The Fed has $4.5 trillion dollars ($4,500,000,000,000) in Treasury bonds and mortgage-backed securities in its balance sheet.)
Fed Chair Janet Yellen gave the welcoming remarks at a research conference on monetary policy at 9:30 am. While not commenting specifically on the Fed’s economic outlook, she noted that it is vital for central banks to understand the effects of monetary policy on the wide economy.
Richmond Fed president Jeffery Lacker, the most hawkish member of the Fed, spoke this morning to the Cato Institute, rejecting calls to keep benchmark interest rates near zero until organic inflation begins to rise. “Monetary policy is uniquely capable of affecting the price level over the longer term,” Lacker said. “By contrast, real activity is driven predominantly by factors beyond the control of monetary policy – productivity and population growth, for example.”
Chicago Fed president Charles Evans gave remarks at 10:15 am at the National Communities Council Fall Leadership Forum in Chicago. He has been outspoken regarding an imminent Fed rate hike since the most recent non-farm payrolls report blew even the most bullish estimates out of the water. However, he took an unexpectedly dovish tone Thursday, disagreeing with Lacker by saying he would like to see inflation rising more before the Fed raises interest rates.
New York Fed president William Dudley speaks at noon today at the Economic Club of New York on economic policy. He will take questions afterwards, which may give some insight into what the #3 man at the Fed is thinking. While leaning towards the dovish side, he has recently been backing Yellen on promoting the possibility of a December Fed rate hike. However, since a Treasury auction is scheduled at 1pm, he may be subdued in his remarks regarding rate hike odds.
The Fed Blitz wraps up when the #2 man at the Federal Reserve, Vice Chair Stanley Fischer talks about financial stability and monetary policy at the same central bank conference that Yellen addressed this morning. Fischer is considered an expert on inflation and hyperinflation, earning high marks during his tenure as head of the central bank of Israel during the financial crisis.
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