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Author Message   Entrepreneur Kurra Bewarse Username: Entrepreneur Post Number: 3975 Registered: 05-2011 Posted From: 24.164.46.35 Rating: N/A Votes: 0 Posted on Tuesday, January 25, 2022 - 5:54 pm:    Looking for Powell to lean on inflation mandate (and Fed put in process) The FOMC started its two-day meeting today. The 2022 committee currently consists of Fed Chair Powell and Fed Governors Brainard, Bowman, and Waller, along with Fed Presidents Williams (New York), Bullard (St. Louis), George (Kansas City), and Mester (Cleveland). There are currently three vacancies on the Board of Governors. The policy decision will be released at 2:00 p.m. ET on Wednesday. Fed Chair Powell's press conference will follow at 2:30 p.m. ET. This meeting will not produce an updated summary of economic projections (the next update will be provided at the March 15-16 meeting). The CME FedWatch Tool indicates there is only a 5.6% probability of a rate hike tomorrow. In other words, if the FOMC elected to raise the target range for the fed funds rate, it would be a huge surprise and most likely greeted initially with a decidedly negative reaction. The reason being is that it would stoke fears that the Fed is going to be much more aggressive in tightening its policy to rein in inflation than the market thought. We think the Fed is late in raising rates and has continued with its asset purchases far too long, but we don't think Jerome Powell relishes shock value when it comes to rate hikes. Accordingly, we would be as surprised as most everybody else if a rate hike was announced tomorrow. The need for the Fed to regain some inflation-fighting credibility at this point, however, is far more important than the need to pacify the stock market masses with some calming narrative about not wanting to prompt an unnecessary tightening of financial conditions with an aggressive policy (or some spineless commentary like that). We think the Fed knows it has already made a policy mistake keeping things as loose as it has for as long as it has. Hence, don't be surprised if you hear Fed Chair Powell spend more time, and express a greater emphasis, on the need to address the inflation side of the dual mandate than he has in past press conferences. That will likely keep the stock market on edge knowing the so-called Fed put is going kaput.