At 2 p.m, Fed Chair Pal is scheduled to give a speech, but we will also hear from Steve, the interim St Louis PR president. It is interesting that Kathleen O’Neal Pace, the interim president, believes that the Fed can wait before deciding to raise rates. She does mention a slight inclination towards hiking rates if inflation progress stalls. However, she does not want to rule out another rate hike and reveals that she had previously forecasted one before the end of the year.
She now seems willing to put that on hold. Pace believes that monetary policy is still modestly restrictive in terms of inflation, although there has been some recent progress. Labor reports suggest that market supply and demand are aligning better. When it comes to financial and tightening credit conditions, Pace acknowledges that they have tightened over the past few months and higher rates are starting to restrict economic activity.
This supports her decision to keep rates steady, at least for now. Pace’s speech echoes the sentiments of the three previous speakers who discussed the need for a wait-and-see approach and their concerns about inflation. We will have to wait and see what Chair Powell says in his own remarks at 2 p.m. One of the key issues for investors is whether the market has properly interpreted Powell’s views.
Today, Powell may need to address any perceived dovish comments and potentially adjust market expectations. Currently, the probability of a rate hike in January is only 9%. Powell’s choices are to either push this probability higher or allow the upcoming data, such as CPI and retail sales, to.