The comments from Federal Reserve Chairman Jerome Powell on 60 Minutes set the tone for the week. I don't think he said anything new but there was plenty of talking... and there is plenty more to come.
I strongly suspect the Fed could live with its current messaging and Fed funds futures pricing in a 16% chance of a March cut and 115 bps this year. They're in a clear wait-and-see mode but -- alas -- there's no 'mute' button at the Fed.
On Monday, we heard from Goolsbee (non-voter) and Kashkari (non-voter). Goolsbee took a dovish tone and said “if we just keep getting more data like we've gotten… we should be well on the path to normalization.”
However in an essay, Minneapolis Fed President Kashkari wrote that “It is possible, at least during the post-pandemic recovery period, that the policy stance that represents neutral has increased.”
I'm not sure how much weight the word 'possible' is carrying there but the only interpretation there would be hawkish.
The day ahead features:
- Mester - Noon ET (1700 GMT)
- Kashkari 1 pm ET (1800 GMT)
- Collins 2 pm ET (1900 GMT)
- Harker 7 pm ET (0000 GMT)
The market is clearly more concerned about hawkish rhetoric at the moment and that may be because of looming 10-year and 30-year auctions on Wed, Thurs. However the momentum is clearly higher in the dollar and yields so that's a tough fade, at least until some data disappoints or CPI benchmark revisions on Friday are lower.
