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The Fed blitzkrieg (is that an actual word?) the market with hawkish rhetoric last week.

And I decided to make it easier for all of you by compiling their most recent statements, as well as the most recent monetary policy bias of Fed officials who weren’t in a talkative mood last week.

Oh, please note that I’ll only be focusing on the voting FOMC members. After all, they’re the ones who get to, well, you know, actually vote.

And for the newbies out there, the Federal Open Market Committee (FOMC) is composed of the Board of Governors and the New York Fed President, who always get to vote, and the other Reserve Bank Presidents. There are eleven regional Reserve Bank Presidents, but only four get to vote on an annual rotating basis.

And here are this year’s voting members:

  • Janet L. Yellen, Board of Governors, Chair
  • William C. Dudley, Vice-Chair, New York Fed President
  • Lael Brainard, Board of Governors
  • Stanley Fischer, Board of Governors
  • Jerome H. Powell, Board of Governors
  • Daniel K. Tarullo, Board of Governors
  • Charles L. Evans, Chicago Fed President
  • Patrick Harker, Philadelphia Fed President
  • Robert S. Kaplan, Dallas Fed President
  • Neel Kashkari, Minneapolis Fed President

Okay, let’s see what their most recent thoughts on monetary policy are.


Janet L. Yellen

  • Board of Governors
  • Chair
  • Clear hawk
  • Open to a March rate hike

In a March 3 speech at the Executives Club of Chicago, Fed Chair Yellen had this to say about monetary policy (emphasis mine):

“Our individual projections for the appropriate path for the federal funds rate reflect economic forecasts that generally envision that economic activity will expand at a moderate pace in coming years, labor market conditions will strengthen somewhat further, and inflation will be at or near 2 percent over the medium term. In short, we currently judge that it will be appropriate to gradually increase the federal funds rate if the economic data continue to come in about as we expect. Indeed, at our meeting later this month, the Committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate.”

We realize that waiting too long to scale back some of our support could potentially require us to raise rates rapidly sometime down the road, which in turn could risk disrupting financial markets and pushing the economy into recession. Having said that, I currently see no evidence that the Federal Reserve has fallen behind the curve, and I therefore continue to have confidence in our judgment that a gradual removal of accommodation is likely to be appropriate. However, as I have noted, unless unanticipated developments adversely affect the economic outlook, the process of scaling back accommodation likely will not be as slow as it was during the past couple of years.”

In short, the Fed could potentially vote for a rate hike during the upcoming March FOMC meeting. Also, Yellen supports a faster pace of hiking rates, which probably means that she still thinks the Fed is on track for three rate hikes this year. Moreover, this is the same thing she said during her February 14 and 15 testimonies before the Senate Banking Committee and the House Financial Services Committee respectively.

Do note, though, that Yellen is not saying that a March rate hike is guaranteed. After all, she clearly said that a rate hike is conditional on economic data coming in within the Fed’s expectations. Still, a clearly hawkish tone.

Oh, this is just trivia and doesn’t really have anything to do with monetary policy bias, but Yellen also noted in her speech that “the ongoing expansion [in the U.S. economy] has been the slowest since World War II, with real GDP growth averaging only about 2 percent per year.” And for reference, historical U.S. average growth is around 3.2% per year.

Yellen said that this problem reflects “structural challenges that lie substantially beyond the reach of monetary policy.” And as I highlighted in my recap of Yellen’s February 14 and 15 testimonies, the Fed is focused on the dual mandate of achieving maximum employment and price stability, “not economic growth per se.”


William C. Dudley

  • New York Fed President
  • Vice Chair
  • Clear hawk
  • Kinda hinting at a March rate hike

In my write-up on the February FOMC meeting minutes, I highlighted that the Fed thinks that it would be “appropriate to raise the federal funds rate again fairly soon.”

And in a February 28 CNN interview, Vice Chair Dudley was asked to clarify what “fairly soon” means. And Dudley first gave a pretty vague answer by saying that: “I think it means what it says. It doesn’t say it’s a week, a month, a couple months. Fairly soon means in the relatively near future.”

However, he later began to clarify a bit by saying that (emphasis mine):

So we’re very much on the trajectory that we said — that we thought we’d be on and we said if we were on that trajectory we’re going to gradually remove accommodation. What else have we seen? We’ve also seen things that should make us even more confident that this is going to continue in the future. After the election we’ve seen very large increases in household and business confidence, we’ve seen very buoyant financial markets — the stock market is up, credit spreads are narrow. And we have the expectation that fiscal policy will probably move in a more stimulative direction. So, put it all together, I think the case for monetary policy tightening has become a lot more compelling.”

Brainard Queen of the Doves

Lael Brainard

  • Board of Governors
  • Wow! The queen of the doves is a hawk now. Still can’t believe it.

In a March 1 speech at Harvard, Brainard said the following (emphasis mine):

“We are closing in on full employment, inflation is moving gradually toward our target, foreign growth is on more solid footing, and risks to the outlook are as close to balanced as they have been in some time. Assuming continued progress, it will likely be appropriate soon to remove additional accommodation, continuing on a gradual path.”

There was a disclaimer at the footnotes of her speech, which emphasized that her statement only represented her own views. However, her clearly hawkish statement was rather surprising since Brainard is a well-known dove. In fact, it can be argued that she was one of the most dovish FOMC members last year. And historically, her somewhat hawkish statements usually have cautious undertones. But here she is now, reborn as a hawk. Kinda hard to believe, but there you go.


Stanley Fischer

  • Board of Governors
  • Forced to admit he’s a hawk
  • Appears to be open to a March rate hike

Fischer gave a speech on March 3, but he didn’t really share his monetary policy bias. Not all that surprising, since the sneaky rascal has a penchant for doing this. This time, however, his observant audience wouldn’t let him squirm away scot-free, so he was pressed for his views during the Q&A session, as well as whether or not the Fed is delivering a concerted message.

And Fischer finally relented and said the following:

“If there has been a conscious effort [to raise rate hike expectations], I’m about to join it.”

There you have it! He confesses to being a hawk! Although Fischer sneakily avoided answering if there is indeed a concerted effort to raise rate hike expectations or not. Also, Fischer was kinda sarcastic when he said it. However, Fischer also said the following, so his hawkish views do seem genuine:

“There is almost no economic indicator that is coming (in) badly in the last three months. So I think the advice that has been given by a large number of the Fed and the FOMC is correct, and I strongly support it.”


Jerome H. Powell

  • Board of Governors
  • Clear hawk
  • Open to a March rate hike
  • Clearly supports three rate hikes this year

Powell’s latest speech was delivered on March 3. However, he didn’t really talk about his monetary policy bias. Fortunately, Powell already shared his monetary policy bias during a March 2 interview with CNBC when he said the following:

“I think the case for a rate increase for March has come together and I think it’s on the table for discussion.”

Boom! Another hawk! And he’s clearly open to a March rate hike to boot! Aside from that, Powell also explicitly said that three rate hikes in 2017 “still feels about right for me.”


Daniel K. Tarullo

  • Board of Governors
  • ???

Tarullo is a man who tends to avoid press time and public speeches. In fact, the last time Tarullo was under the spotlight was when he announced his resignation from the Fed, effective on or around April 5. Unfortunately, Tarullo didn’t really share his monetary policy bias then.

Sadder still, the last time Tarullo gave a speech was on December 2, which is before the December 2016 rate hike, and he didn’t really talk about monetary policy anyway. The last time Tarullo discussed monetary policy was in a September 9 interview with CNBC, so that’s outdated and no longer relevant.


Charles L. Evans

  • Chicago Fed President
  • I’m (likely) still a dove

In a February 3  speech, Evans showed his dovish feathers when he said the following:

“Appropriate policy calls for a slow pace of normalization in order to give the real economy an adequate growth buffer to withstand downside shocks … I favor taking a gradual path for the adjustment of the funds rate back toward its long-run level.”

He reiterated his support for a slower path to tightening during a February 9 speech, although he didn’t spell out how many rate hikes are appropriate for 2017.

And in his March 3 speech (transcript hasn’t been released yet), he didn’t really talk about monetary policy, but he did mention that his concerns about inflation expectations, which is kinda dovish.

Despite all that dovish talk, however, Evans has also said that the Fed’s median forecast of three rate hikes in 2017 “is not unreasonable,” which is more hawkish. Kinda confusing, eh?

Hmm. Let’s play it safe and mark this guy down as a dove.


Patrick Harker

  • Philadelphia Fed President
  • Clear hawk
  • Open to a March rate hike
  • Clearly supports three rate hikes this year

Harker gave a speech on February 28. And in that speech, he said that the economy is “in pretty good shape” overall. In addition, there’s “a steady pace of employment.” And while inflation has “been a little more stubborn,” the Fed’s “on track there as well.” As such, he made the following conclusion:

“I see three hikes as appropriate for 2017, assuming things stay on track.”

Not only that, but Harker was also one of the first to say that a March rate hike is possible when he said on February 6 that:

“I think March should be considered as a potential for another 25-basis point increase.”

So, yeah, clearly a hawk.


Robert S. Kaplan

  • Dallas Fed President
  • Clear hawk
  • Hints that he’s open to a March rate hike

In a March 1 speech, Kaplan showed that he’s one of those Fed officials who fears a potential overshoot in inflation and employment when he gave the following statement:

“We should begin the [tightening] process sooner so we can ensure that it is gradual and patient. My fear is if you get a situation where inflation starts to heat up and you overshoot employment, we might be in a position at the Fed where we have to raise very dramatically, which history has shown tends to create recessions and cause job growth to be weaker.”

He already said this before in a February 27 CNBC interview. Plus, Kaplan was asked during the CNBC interview if he views March as an “opportunity” for a rate hike.

And Kaplan answered as follows:

“I think you need to take – once you’ve decided that, I think you need to take advantage of windows [of opportunity] when they present themselves because you could have exogenous factors, you could have market events that could give us some pause. So I think we’re moving close to our dual mandate objectives, we should take opportunities to remove some amount of accommodation in the context of a patient, gradual path of rates.”

He tries to present a vague answer, but it looks like Kaplan is hinting that he’s open to a March rate hike.


Neel Kashkari

  • Minneapolis Fed President
  • Likely still dovish

In a rather long February 7 blog post, Kashkari explained why he voted to keep rates steady during the February FOMC statement and why he will likely continue doing so. To sum it all up, Kashkari views that developments in employment and inflation do not yet warrant immediate rate hikes.

Kashkari repeated this sentiment on February 21 when he said that the labor market “more room to run.” I guess this means he’s clearly a dove, at least with regard to a March rate hike.

So, 7 out of the 10 voting FOMC members are hawks. And out of those 7 FOMC members, 6 either hinted at or explicitly said they are open to a March rate hike. And let’s not forget that Brainard, the queen dove herself, is now a hawk. Although she didn’t clearly signal support for a March rate hike.

It’s, therefore, no real wonder why odds for a March rate hike are now at 79.7%.

March Rate Hike Odds (As of March 3)
March Rate Hike Odds (As of March 3)