Federal Reserve officials speak about monetary policy and the economic outlook on different scheduled events. Here are the main comments that could anticipate their November decision. Ahead of their words, market participants were pricing in increased odds for a 50 basis points (bps) interest rate cut in November.
Federal Reserve (Fed) Governor Lisa Cook said late Thursday, she "wholeheartedly supported a 50 bps rate cut."
Further comments
On path of policy, will look carefully at data, outlook, balance of risks.
Normalization of economy, particularly of inflation, 'quite welcome.'
Labor market 'solid' but has cooled noticeably; may become more difficult for some to find employment.
Sees significant easing in inflationary pressure.
Upside risks to inflation have diminished; downside risks to employment have increased.
In the short-run AI could be inflationary, because of high demand.
Over the long run AI could be disinflationary.
However, Federal Reserve (Fed) Governor Michelle Bowman, a member of the Fed's Board of Governors since 2018, made no new comments on monetary policy, repeating those made a couple of days ago.
As the post-meeting statement noted, I dissented from the FOMC's decision, preferring instead to lower the target range for the federal funds rate by 1/4 percentage point to 5 to 5‑1/4 percent.
Key quotes
Prices remain much higher than before the pandemic, which continues to weigh on consumer sentiment.
Economic growth moderated earlier this year after coming in stronger last year.
Although personal consumption has remained resilient, consumers appear to be pulling back on discretionary items and expenses, as evidenced in part by a decline in restaurant spending since late last year.
While unemployment is notably higher than a year ago, it is still at a historically low level and below my and the Congressional Budget Office's estimates of full employment.
The labor market has loosened from the extremely tight conditions of the past few years.
Preference for a more measured re-calibration of policy
I continue to see greater risks to price stability, especially while the labor market continues to be near estimates of full employment.
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
This section below has been published ahead of Federal Reserve speakers
- Remarks from Fed Chair Jerome Powell and his colleagues will hog the limelight on Thursday.
- Fed officials lately explained why they supported an outsized rate cut at the September meeting.
- Powell’s speech and Fed commentary could rock the US Dollar against its major rivals.
With the return of US Federal Reserve (Fed) policymakers to the rostrum late last week, the US Dollar (USD) continues to bear the brunt of the dovish Fed outlook on interest rates.
The US central bank opted last week for a 50 basis points (bps) rate cut, bringing the fed funds rate to a range of 4.75%-5.0%. The Summary of Economic Projections, the so-called Dot Plot chart, suggested an additional 150 bps of rate cuts for this year and the next.
Fed policymakers stick to the dovish stance
Since then, several Fed officials have justified their stance for an outsized rate cut move, barring Fed Governor Michele Bowman, who dissented by favoring a 25 bps reduction following the September policy meeting.
Citing progress on disinflation and loosening labor market conditions, Atlanta Fed President Raphael Bostic and his Minneapolis and Chicago counterparts, Neel Kashkari and Austan Goolsbee respectively, explained on Monday their reasons behind voting for a large rate cut instead of a smaller first cut in four years.
In his remarks prepared for a virtual event organized by the European Economics and Financial Centre on Monday, Bostic said that “in my view, the 50-basis-point adjustment at the meeting last week positions us well should the risks to our mandates turn out to be less balanced than I am thinking,”
Kashkari said that the 50 bps rate cut was the ‘right decision.’ Meanwhile, Goolsbee came out the most dovish, stating that “many more rate cuts are likely needed over the next year, rates need to come down significantly.”
FXStreet’s FedTracker, which gauges the tone of Fed officials’ speeches on a dovish-to-hawkish scale from 0 to 10 using a custom AI model, rated Goolsbee’s words as dovish with a score of 2.0.
Fed Governor Michelle Bowman called for a "more measured approach" to cutting interest rates on Tuesday, citing that "I continue to see greater risks to price stability, especially while the labor market continues to be near estimates of full employment.”
Conversely to Goolsbee’s valuation, FXStreet’s FedTracker rated Bowman’s words as hawkish with a score of 7.0.
Fed Governor Adriana Kugler said late Wednesday that she “strongly supported” the Fed’s decision to cut the interest rates by a half point last week. Kugler added that she “will support additional rate cuts going forward.”
FXStreet’s FedTracker rated Kugler’s comments as dovish with a score of 3.2.
Markets are currently pricing in a 61% probability that the Fed will cut rates by another 50 bps in November, according to the CME Group’s FedWatch Tool. For the next two Fed meetings, changes to the Fed rate are implying an over 80% probability of 75 bps or more in cuts from the current level.
Powell speech to hog the limelight
Amid growing expectations of an outsized rate cut at the next policy meeting, all eyes turn to a bunch of Fed officials who are due to make their scheduled appearances at two different events, starting from 13:10 GMT on Thursday.
Boston Fed President Susan Collins, Fed Governor Adriana Kugler, Fed Vice Chair For Supervision Michael Barr, and Minneapolis Fed President Neel Kashkari are due to participate in a virtual fireside chat at the Boston Fed’s Financial Inclusion and Banking Supervision Workshop. Collins and Kugler are scheduled to speak at 13:10 GMT while Barr and Kashkari are scheduled at 17:00 GMT.
At 13:15 GMT, Fed Governor Michelle Bowman delivers a speech about the US economic outlook and monetary policy at a workshop organized by the Mid-size Bank Coalition of America Board of Directors.
Almost at the same time, Fed Chairman Jerome Powell’s pre-recorded opening remarks at the US Treasury Market Conference, in New York, will be delivered. New York Fed President John Williams and Fed official Barr are also going to speak at the conference.
Meanwhile, Fed Governor Lisa Cook will participate in a moderated discussion about artificial intelligence and workforce development at an event hosted by the Federal Reserve Bank of Cleveland and Columbus State Community College, in Ohio. The event is scheduled for 14:30 GMT.
The main focus will be on Powell’s speech, as traders look out for fresh hints on the size of the next Fed rate cuts. Powell, during his post-September meeting press conference, said that "our decision today reflects growing confidence that strength in the labor market can be maintained,” adding that “we concluded that 50 bps cut was the right thing.”
About Jerome Powell (via Federalreserve.gov)
"Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD breaks below 1.1000 on stellar NFP
The buying bias in the Greenback gathers extra pace on Friday after the US economy created far more jobs than initially estimated in September, dragging EUR/USD to the area of new lows near 1.0950.
GBP/USD breaches 1.3100 after encouraging US Payrolls
The continuation of the uptrend in the US Dollar motivates GBP/USD to accelerates its losses and breaches 1.3100 the figure in the wake of the release of US NFP.
Gold rebounds from daily lows and flirts with $2,670
Following a post-NFP dip to the $2,640 region, Gold prices now embarks on an acceptable rebound and retest the area of $2,670 per ounce troy despite the marked advance in the US Dollar and rising US yields across the board.
US Payrolls surge in September, as 50bp rate cut ruled out
US payrolls data surprised on the upside in September, rising by 254k, smashing expectations of a 150k rise. The unemployment rate fell to 4.1% from 4.2%, average hourly earnings increased to a 4% YoY rate and there was a 72k upwards revision to the previous two months’ payrolls numbers.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
Five best Forex brokers in 2024
VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals.