Fed's range of expectations for Fed Funds Rates

New Fed Appointee Miran As Oultier To Fed Targets

There was one outlier to the Fed targets who wants another 125bp in cuts this year. Most likely, that outlier was from the new Fed appointee Stephen Miran. He was also the only dissenting voice who wanted a 50bp cut at this meeting.

The Fed mean estimate calls for another 50bp of cuts this year, but as you see from the chart above, there's a wide dispersion between a 50bp cut (Nine at 3.63) and no cut (Six at 4.14).

The outlier for the Fed year-end target circled in yellow above was most likely Miran.

Powell Swipes At Miran During The Press Conference

Fed Chair Jerome Powell took a thinly veiled swing at Miran in the press conference today by saying, 'there wasn't a widespread support for a 50bp cut at all.'

That meant that Miran's input, as per Powell, wasn't given much respect by the Fed committee.

Versus last Fed meeting's two dissents, only having Miran as this meeting's dissent, showed that most of the Fed acted politically independent.

Question About Miran's Independence

There have been widespread questions on Miran's independence since he did not give up his job in the White House while now serving on the Fed. Also, the White House has been pushing for more cuts by President Trump, calling Powell 'Too Late' multiple times.

Why Markets Ultimately Want Fed Independence

Fed independence allows markets to have faith in the Fed that it will focus on keeping inflation in check over time. Low, controlled inflation helps markets and valuations over the long term by keeping rates low.

Any lack of confidence by markets in Fed independence could shake markets over time. Cuts when they are not needed may boost markets initially, but if inflation appears, there could be a crunch on consumers and the economy, which would potentially end up hurting markets. Markets could also get hurt if there's a need to hike to stem that inflation.

Powell did a good job today answering Fed independence questions, but still, questions remain. In question is whether the Fed raised its GDP and inflation assumptions today, which is at odds with their decision to cut rates. Why cut rates if you are more bullish about growth? That as well should call into question if the Fed wasn't swayed generally by political pressure.

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