The Chairman of the US Federal Reserve of Jerome Powell testifies before the hearing of the Banking Committee, Housing and Urban Affairs in Senate on a “report on semi -annual monetary policy Congress” at Capitol Hill in Washington, USA, February 11, 2025.
Craig Hudson | Reuters
The popular narrative among creators of federal reserve policies is that politics is “well positioned” to adjust to any risk of upside down or flaws. However, it could be more accurate to say that politics is stuck in a position.
With an abundance of unknowns that spin through the economy and halls in Washington, the only equipment that the central bank can really be these days is neutral because it begins what could wait long for security about what’s really ahead.
“In recent weeks, we have heard not only enthusiasm – especially from banks, about possible shifts in tax and regulatory policies – but also a wide variety of future trade and immigration policies,” said Atlanta President Fed Raphael Bostic in Post on the blog. “These crosses inject more complexity into the creation of politics.”
Bostic comments have arrived during the Active Week for what is known on Wall Street as a “Fedpeak” or Corridge that happens between a chair policy meeting from a chair Jerome PowellCentral Bank governors and regional presidents.
Officials who often spoke about politics as a “well-positioned”-the execution is now the main statement after the meetings. But more and more are the caution because of the volatility that comes from President Donald Trump Aggressive trade and economic agendalike other factors that could influence politics.
“Insecurity” is an increasingly common topic. In fact, Bostic called his blog on Thursday “uncertainty calls for caution, humility in the creation of politics.” The day earlier, the Federal Committee of the Open Market Determined Discharged minutes From a meeting from 28 to 29 January, with a dozen references to an uncertain climate in document.
The minutes particularly cited “elevated insecurity in terms of scope, time and potential economic effects of possible changes in trade, immigration, fiscal and regulatory policy.”
Factors of uncertainty in making a Fed decision in two ways: the influence he has on Picture of employmentwhich was relatively stable and inflation, which was mitigated but could climb again As consumers and business leaders are afraid of influential tariffs who could have prices.
Missing the target
Fed aiming for 2%inflation, which is a goal that has remained elusive for the duration of four years.
“I see the risk of inflation right now, which remains above the goal as distorted upside down,” President St. Louis Feda Alberto Musalem reporters. “My basic scenario is one in which inflation is still converging toward 2%, providing monetary policy remains modestly restrictive, which will take time. I think there is a potential for inflation to remain high and the activity slows down. It is an alternative to the script, it is not Basic scenario, but I’m careful about it. “
Operational in Musalem’s comment is that the policy holds “modestly restrictive”, where he considers the current level of Fed funds between 4.25%-4.5%. Bostic was a little less explicit in the sense of need to keep the stands on hold, but emphasized that “this is not the time for complacency” and noted that “additional threats of prices stability” could occur. “
The president of the federal reserves in Chicago Austan Gololsbee, who is considered to be a FOMC hawk members among the least, when it comes to inflation, was more measured in his estimation of tariffs and did not offer comments in separate performances, including one on CNBC, where he thinks That the footsteps should need to go.
“If you are just thinking about tariffs, it depends on how much countries will apply and how big it will be, and the more it looks like a shock of an covide size, the more the nervous it should be,” Gollsbee said.
A lot of risks ahead
However, the wider, January record pointed to the Fed very adapted to potential shocks and is not interested in testing water with any further moves of interest rates. The summary of the meeting pointed out that the members of the Committee wanted to “further progress on inflation before executing additional adjustments to the target range for the rate of federal funds”.
He also cares more than tariffs and inflation.
The records characterized the risk of financial stability as “notable”, especially in the field of influence and level of long -term debt that banks hold.
A prominent economist Mark Zandi – who is not usually alarming – said in a panel discussion presented by the Peter G. Peterson Foundation to take care of the danger of a $ 46.2 bilian bond market.
“In my opinion, the biggest risk is to see a big sale on the bond market,” said Zandi, the main economist of Moody’s Analytics. “The bond market feels incredibly fragile for me. The water supply is broken. The primary traders do not keep up with the debt amount.”
“There are only so many things gathering that I think there is a very significant threat to see at some point in the next 12 months a big sale on the bond market,” he added.
In this climate, he said, there is a scarce chance that the Fed reduces rates – although the prices are prices in potential by half a percentage point of reduction by the end of the year.
This is desirable to think about the tariffs and other intangible things that hangs over the head of the Fed, Zandi said.
“I just don’t see how the Fed cut interest rates here until you get a better feeling that inflation returns to Target,” he said. “The economy has come in 2025. In a pretty good place. I feel like it gets well. It should be able to solve a lot of storms. But there seems to be a lot of storms.”
