「Fed Watch」: Intense Internal Debate at the Fed Puts Dovish Tone at Risk

BlockBeats News, April 28th, according to a report by Nick Timiraos, a journalist from The Wall Street Journal known as the "Fed Whisperer," the Federal Reserve's two-day policy meeting will conclude early Thursday morning Beijing time, marking Powell's last meeting as Chair. The market widely expects the Fed to maintain status quo. The question is whether policymakers will hint that rate cuts are off the table or just postponed. The energy shock from the Iran war, coupled with multiple supply disruptions, has reignited concerns about stagflation risks. The Fed is likely to keep the benchmark interest rate at 3.5% to 3.75% unchanged, while internally engaging in intense debates on policy wording adjustments and the rate-cutting path.

The U.S. is undergoing its fourth supply shock within five years, including the pandemic economic restart, the Russia-Ukraine conflict, the "trade war," and the current Middle East war. Fed Governor Waller, who had previously supported last year's three rate cuts due to labor market concerns, has shifted his focus to inflation risks this month. Despite the ceasefire in the Iran war, the Strait of Hormuz remains significantly blocked, causing aviation fuel prices to soar. Fed officials expect it will take at least a year for inflation to return to the 2% target.

Timiraos stated that the Fed committee's more pressing issue currently is whether to amend the official statement to suggest that rate cuts are no longer under consideration. Since the end of last year, the statement has consistently included the phrase "the next policy move is more likely to be a rate cut than a hike." In the last two meetings, a few officials have sought to remove this, indicating an equal likelihood of rate cuts and hikes. However, Timiraos pointed out that the mainstream view in the committee deems such adjustments too aggressive. Formal changes in wording would tighten the financial environment, a hawkish move that officials are not yet prepared for. The officials will discuss this matter again this week. (Golden Finance)