Growing up I always remember my dad telling me to “close the door”, exclusively referring to the storm door on the front of the house because the wind had a unique way of getting in and pulling the door open during a bad storm.
Seems Fed Chair Powell never lived a day with my dad, because yesterday’s FOMC conference and Q&A was all about making sure the door was left open, and not just a crack, we’re talking wide open.
First, before the conference could even begin, the FOMC statement dropped the bomb that there were 4 “dissenting votes” against keeping rates steady. There was the usual Miran vote looking for a return to ridiculously low interest rate policy (Interest A La Trump?), however there were three unique dissenting votes. Dissenting, not in that they disagreed with the policy action, but rather they disagreed with including what has come to be known as “the easing statement”, a line which markets have interpreted is being designed to leave open a pathway to future rate cuts.
It may seem like a trivial message, after all, they agreed with keeping rates steady, but for an institution that scrutinizes the use of “some”, many”, “most”, “several” and “few”, language is never trivial. We’ll never know what goes on behind the closed doors of the two-day meeting, but I’m certain the intention here was to make the pathway to a future potential rate hike more palatable for markets, should the need arise for monetary policy to go that direction. (By the way, if you’re interested in what each word means relative to the number of fed officials, you can find the info here: https://www.federalreserve.gov/econres/notes/feds-notes/the-fomc-meeting-minutes-an-update-of-counting-words-20170803.html)
The next little delightful door left ajar by Powell surrounded his comments on his career plans once the Trump nominee, Kevin Warsh, takes over. Powell said he would remain with the Fed until he felt it would be appropriate to leave, an event not seen since 1948. If the commotion around dissenting voters wasn’t going to be enough to talk about, his remaining part of the Fed certainly will spark plenty of extra commentary. On one side of the argument he will be chided for playing political games while others will say his efforts are noble to ensure the independence of the Fed.
