The more that Federal Reserve officials speak, the more confused investors and economists become.
Governor Daniel Tarullo repeated his cautious assessment of the economy
during an interview Friday on CNBC television, while Boston Fed
President Eric Rosengren argued there was a reasonable case for gradual
tightening. Their remarks, ahead of the Sept. 20-21 meeting of the
policy-setting Federal Open Market Committee, illustrate divisions on
the FOMC that don’t help clarify what officials will decide.
everyone is staying in their lanes,” said Stephen Stanley, chief
economist at Amherst Pierpont Securities in New York. That makes it
harder to gauge the implications of recent mixed data, including a
below-forecast August U.S. jobs report. “The Fed has been so arbitrary
in shifting rationales, it’s not systematic enough that people in my
business can look at the data and be confident about what the Fed’s
going to do.”
Fed hawks and doves -- those who favor an interest-rate increase and
those who argue against it, respectively -- are retrenching their
positions and using recent data to bolster their arguments. Hawks say
consumer spending is strong, the job market has made impressive gains
and keeping rates too low for too long comes at a financial stability
cost. Doves say employment could progress further, inflation has only
ticked up and a handful of weaker-than-expected data points bolster the
case for patience.
Investors and analysts still see relatively low chance that the Fed will raise interest rates this month.
Friday, Tarullo signaled he’s willing to be patient before deciding the
economy has enough momentum to raise interest rates, while declining to
rule out the chance that he and his colleagues could move before the
end of the year.
“I wouldn’t foreclose that possibility,” Tarullo said on CNBC
when asked about a 2016 rate increase. “It’s important for all of us,
in going into each meeting, to remain open to the possibility that
momentum has changed, that expectations have changed, and thus for us to
change our own views.”
the same time, he emphasized that the labor market has been basically
flat and inflation has only ticked up. He acknowledged that he was
viewed as a member of the “show-me” camp inside the Fed, referring to
those who want to see more evidence of inflation.