Asks what the Fed can do next given mixed economic data showing stable labor market but inflation still a question mark.
Romaine Bostick
Eric Rosengren
Conditions for easing are not as strong as a quarter ago. CPI at 2.7% is substantially above the 2% target and has been gradually rising. The Fed has missed its target for almost 5 years.
Eric Rosengren
The Fed is well-situated to wait and see if the economy picks up. Fiscal policy is stimulative due to large deficits and the 'big beautiful bill' with investment credits and lower taxes. There's no reason for the Fed to change rates if growth pans out.
Notes the parlor game in markets expecting more accommodative policy due to political factors, including Powell's replacement and White House jawboning. Asks if this feels different in 2026.
Romaine Bostick
Eric Rosengren
The Fed focuses on data, but who makes decisions matters. The administration has made clear it won't appoint someone who doesn't believe rates should drop significantly. Most optimism for lower rates assumes a new Fed chair in the second half of the year.
Asks about Fed independence given DOJ subpoenas, Supreme Court arguments, and statements from former Fed chiefs and Jamie Dimon. Is this the beginning of the end?
Romaine Bostick
Eric Rosengren
Fed independence is critically important. Losing it is something that happens in third-world countries trying to manage deficits or influence elections. The Fed was constructed to be independent to avoid the political business cycle.