Central Bank Watch: Fed Speeches And Interest Rate Expectations Update


In this edition of Central Bank Watch, we’ll review the speeches made over the past week by various Federal Reserve policymakers, including the Fed Chair himself. In the run-up to the April 28 meeting (and ahead of the blackout window), Fed policymakers were extremely present in the day-to-day machinations of financial markets. The signposts have been made clear: policy isn't changing soon.


Federal Reserve policymakers are heading towards their April rate decision culminating tomorrow, but that doesn’t mean policy is heading anywhere new soon. For the past two-plus weeks, Fed officials have been extremely disciplined with respect to a persistent drumbeat of keeping rates low and policy accommodative at the onset of the US economy’s recovery from the coronavirus pandemic.

April 11 – Powell (Fed Chair) promises to keep easing in place while striking an optimistic tone, noting “we feel like we’re at a place where the economy is about to start growing much more quickly and job creation coming in much more quickly.”

April 12 – Bullard (St. Louis president) says that getting three-quarters of the population vaccination would be a “necessary condition” for the Fed to consider tapering its bond-buying program.

Rosengren (Boston president) says that the Fed needs to be careful with allowing inflation to overshoot, saying “in the post-war period we don’t have a pandemic experience with a new monetary policy framework with very aggressive fiscal policy all happening at the same time.”

April 13 – Harker (Philadelphia president) says the Fed won’t be changing course soon, noting “for now, Fed policy is going to hold steady. We’ll keep the federal funds rate very low and continue making more than $100 billion in monthly Treasury bond and mortgage-backed securities purchases.” This stance didn’t reflect a lack of optimism over the economy, as he also said that he’s “expecting GDP growth to come in around 5% to 6% in 2021…the labor market to parallel GDP growth and unemployment to fall throughout this year.”

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