Fed's Brainard & Fed's Stanley Fischer Remarks: 'Call It A Draw' - CIBC

Hawks are rarer birds on the FOMC these days, and the most important among them, Fed Vice Chair Fischer, played his role in remarks today. He cited “the first stirrings of an increase in the inflation rate” as a sign that its  “Phillips curve” tie to the jobless rate is still working. He still expects that softer oil prices will end up being a net benefit to US growth. While  he accepts the view that the equilibrium interest rate will prove to be lower in this cycle than in the past, he argues that we don’t know how much lower that will prove to be. This wasn’t a speech aimed at current economic analysis, but there were at least a few hawkish hints sprinkled in.

Separately, Fed dove Brainard was much more vociferous in outlining the dovish case, citing the lack of assurance that inflation will move higher, the low levels of compensation and inflation expectations, the need to protect domestic sources of activity (labor and consumption) in the face of export weakness, as key principles for monetary policy. While her speech also dealt with financial system and regulatory issues, its clear from her economic discussion that she will be in the “no hike” camp for a number of quarters to come.

Call it a draw then, with one speech on either side of the Fed’s debate.

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