Dueling FOMC messengers

In an interview yesterday with the Wall Street Journal, Atlanta Fed President Dennis Lockhart gave a very hawkish view of the likely path of FOMC policy.  Although speaking for himself and not the FOMC, he said that the bar is high for not acting in September and that it will take a significant deterioration in the economic picture to not hike rates this year.

His comments echoed the sentiment expressed by St Louis Federal Reserve President James Bullard in a separate interview with the Wall Street Journal last Friday. 

This morning, Governor Jay Powell went on CNBC to reiterate the views and tone presented by the FOMC in the July minutes, appropriate to wait and see data before deciding in September, the FOMC will move forward as conditions warrant, and the path of rate hikes is likely to be gradual. 

He emphasized that there is a lot of important data coming up, especially the next two employment reports, and that he could not decide on September without having that data. 

Officially, Governor Powell was speaking for himself and giving his own views.  Nonetheless, we view this interview as a purposeful response to the interviews given by Regional Federal Reserve Presidents Bullard and Lockhart. 

That Powell is a member of the Board combined with his unusual appearance on television in a live interview format indicates that the Chair likely wants to maintain control of the messaging approaching the September meeting.  

"She likely wants neither the committee nor markets to become too certain in either direction over a September rate hike. The FOMC is comfortable, for now, with market pricing a roughly 50% probability of a rate hike. At this level, the FOMC maintains the optionality it seems to desire over the rate hike cycle", says Barclays.