Federal Reserve Officials Unanimously Defend Policy Independence, While Signaling Pause in Rate Cuts

BlockBeats News, January 15th, several Federal Reserve officials on Wednesday publicly emphasized the importance of central bank independence in formulating monetary policy. At the same time, officials generally signaled that the Fed may pause rate cuts at this month's meeting, citing the ongoing strength of the U.S. economy, elevated inflation levels, and the need for continued restrictive monetary policy.

In response to the U.S. Department of Justice's subpoena regarding the Fed's headquarters renovation project and the related investigation into whether it influenced policy decisions, several officials pointed out that political or judicial pressure should not interfere with monetary policy decisions. Minneapolis Fed President Kashkari explicitly supported Powell's position, stating that the investigation essentially touches on the issue of monetary policy independence, and indicating that even with a change in leadership, the Fed will continue to make decisions based on data and analysis.

Chicago Fed President Evans, Atlanta Fed President Bostic, and New York Fed President Williams also stressed that the Fed does not set rates under political pressure, highlighting the importance of maintaining long-term inflation stability. In contrast, Fed Governor Brainard downplayed the impact of the investigation, believing that inflation is correctly on track to ease and expressing reservations about the public support some central bank governors have shown for Powell's actions.

Regarding the economic outlook, except for Brainard, most officials implied that another rate cut is unlikely at the FOMC meeting later this month. Kashkari bluntly stated that given high inflation and a strong economic performance, rates should remain unchanged for now, but conditions for a rate cut may be met later this year. The market generally expects that the Fed may not resume rate cuts until after June.

Bostic emphasized that policy still needs to maintain a grip on economic activity, and the Fed still has a "considerable way to go" before achieving the 2% inflation target. Overall, there is a consensus forming within the Fed: it is more prudent to keep rates stable in the short term until inflation clearly recedes further.