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Colby Smith

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2023-01-31
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2023-01-31
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  1. “We heard this in the December minutes of the minutes from the December meeting where officials talked about being concerned about an unwarranted easing of financial conditions and one that reflects a misperception about the Fed's reaction function. And I've spoken to several former officials, including Dennis Lockhart of the Atlanta Fed, Don Cohn, the former vice chair. And all of them say that a critical component of the way in which the Fed gets the economic outcome it's striving for is for financial markets and to be aligned with kind of where they think policy is going to go. So taking that all together, it kind of seems as though it might be premature to make any real adjustments to the statement. But again, I mean, there's a lot of. You know, good points on either end of that.”

    2023-01-31 · Forward Guidance · What This Fed Watcher Is On The Lookout For | Colby Smith (February 2023 FOMC) · IDENTIFIED FROM THE TRANSCRIPT

  2. “At a moment where there is this divergence, where they're clearly concerned about financial conditions easing, where the data is still not telling this cohesive story, I think that there is this sentiment among people that I speak to that it's just premature to make any substantive change at this stage. Now, as I mentioned, there are ways to kind of thread the needle and acknowledge the fact that they're kind of nearing the end here. But it's really kind of a toss-up as to whether or not they want to open that can of worms basically at a moment when financial conditions are already easing. And the reason why they're so fixated on financial conditions is because it's critical to the transmission of their monetary policy. So we heard this from Chair Powell back at the December press conference. He says it's important that financial conditions reflect the policy restraint that the Fed is putting into place.”

    2023-01-31 · Forward Guidance · What This Fed Watcher Is On The Lookout For | Colby Smith (February 2023 FOMC) · IDENTIFIED FROM THE TRANSCRIPT

  3. “Now, that's not to say that they don't acknowledge the fact that there's been progress. Governor Waller had one of the most notable speeches of the intermediing period right before the blackout, actually, on that Friday. And he said, you know, he made the case for cautious optimism about, you know, what's been going on in the economic data. So they're acknowledging that things are a little bit different and they don't have to perhaps be as aggressive in their posture. I think the thing that I hear most often is that they need to do this in a really kind of thoughtful way because if they tip their hand too early,”

    2023-01-31 · Forward Guidance · What This Fed Watcher Is On The Lookout For | Colby Smith (February 2023 FOMC) · IDENTIFIED FROM THE TRANSCRIPT

  4. “Yeah, absolutely. So I think what's important to note is in the dot plot back in December, only two of the 19 officials had rates topping out below 5%, 17. So the vast majority of the committee was of the view that it was going to have to surpass five percent. And in the intermeeting period, we haven't really heard much of a divergence in those views from officials. So I think that if in the intermeeting period we had heard someone like Governor Waller or someone like President Bullard, some of these more hawkish leaning officials talking a little bit more about the need to slow or to consider lags in the policy changes and things like that, then I think it would have tipped the hand a little bit to there being a more substantive shift in the statement.”

    2023-01-31 · Forward Guidance · What This Fed Watcher Is On The Lookout For | Colby Smith (February 2023 FOMC) · IDENTIFIED FROM THE TRANSCRIPT

  5. “Maybe two or three of the forecasters were in the SEP summary about economic projections, the dot plot. A lot of those dot plots were in 5% to 5.25%, which would be another increase in June. Yeah, what does your gut say about the language? And can you also share just how thoughtfully the Fed crafts these statements to be dissected by people such as yourself and how if there is a change, it's willful, it is intentional.”

    2023-01-31 · Forward Guidance · What This Fed Watcher Is On The Lookout For | Colby Smith (February 2023 FOMC) · IDENTIFIED FROM THE TRANSCRIPT

  6. “For some time, which is what we've heard from Fed officials quite frequently and across the dovish hawkish spectrum, basically in the past couple months or so. So those are just a couple things that are top of mind.”

    2023-01-31 · Forward Guidance · What This Fed Watcher Is On The Lookout For | Colby Smith (February 2023 FOMC) · IDENTIFIED FROM THE TRANSCRIPT

  7. “Quite sure how much more to do. Because if they prematurely change the language, it could kick off another round of easing financial conditions, which is something that they're obviously keeping a close eye on. And it could signal too early perhaps that they're ready for a pause. But if they don't change the language, I think some people are going to say, well, this statement feels a little bit stale. It's not reflecting the fact that, you know, we've had significant progress in the data over the coming months. So it'll be interesting to see how the Fed squares these two things. One way they could do it is to change that language about ongoing increases, but include something in there about the very high bar for rate cuts. So they could do that by saying, you know, rates need to be held at a sufficiently restrictive level.”

    2023-01-31 · Forward Guidance · What This Fed Watcher Is On The Lookout For | Colby Smith (February 2023 FOMC) · IDENTIFIED FROM THE TRANSCRIPT

  8. “Now in the past couple of months and pretty much since the Fed first started raising interest rates in this tightening cycle back in March of last year, they've had this phrase the FOMC anticipates that ongoing increases in the target range is going to be appropriate in order for basically rates to reach a sufficiently restrictive level and then which will help bring inflation back down to 2%. And so the big speculation ahead of this meeting is what do they do with that language now that we're kind of nearing the end point do they do they remove ongoing altogether do they change it to further tightening or additional increases that there's a couple of variations that have been thrown around but I think the real question is do they want to change the language at a moment in time when they're not”

    2023-01-31 · Forward Guidance · What This Fed Watcher Is On The Lookout For | Colby Smith (February 2023 FOMC) · IDENTIFIED FROM THE TRANSCRIPT

  9. “On the terminal rate needing to rise above 5% for no cuts to be in play for the entirety of the year and how they're really taking in all this additional economic data that we've received in the intermeeting period, which shows a more mixed picture. You know, we don't yet have this cohesive story of a weakening economy, but we're getting quite close to that. And so it'd be interesting to see kind of what they're taking in and how they're kind of digesting all this new information. And then what it then means for the policy path forward. So in terms of, you know, specifically the way in which they're going to be signaling some of this, we're obviously going to be hearing from Chair Powell at 2.30 in the press conference, as you mentioned, but everyone's going to be dissecting around 2 p.m. the policy statement that's going to come alongside the rate decision.”

    2023-01-31 · Forward Guidance · What This Fed Watcher Is On The Lookout For | Colby Smith (February 2023 FOMC) · IDENTIFIED FROM THE TRANSCRIPT

  10. “Everyone's really expecting a quarter point interest rate increase. That's been well telegraphed by a variety of Fed officials. So it seems like we're going to get this step down once again from the pretty large interest rate increases that have come to be a common occurrence just in the last year or so from the Fed. But we're now returning to a more normal cadence of interest rate tightening. But I think the kind of more interesting aspect of tomorrow's meeting and rate decision is really going to be what the Fed signals about what's coming next. So how many more 25 basis point interest rate increases can we expect this year? How close is the Fed to wrapping up what has become one of the most aggressive campaigns in its history to raise interest rates? Have they softened their view at all?”

    2023-01-31 · Forward Guidance · What This Fed Watcher Is On The Lookout For | Colby Smith (February 2023 FOMC) · IDENTIFIED FROM THE TRANSCRIPT

  11. “Glad to hear. So, Colby, I want to know what you think tomorrow's meeting will be, what is sort of your expectation, and also what will you be, what is on your radar that you'll be on the lookout for that when it happens, you'll say, aha.”

    2023-01-31 · Forward Guidance · What This Fed Watcher Is On The Lookout For | Colby Smith (February 2023 FOMC) · IDENTIFIED FROM THE TRANSCRIPT