A Year-End Fed Speaker Quiz

Since Chair Powell’s post- FOMC press conference last week, a surfeit of other Federal Reserve luminaries has been offering their opinions. Much of the commentary seems to push back upon the market-friendly commentary offered by the Chairman. This is something we have seen before. As we posited last week, investors like what Powell has to say because he is one of them – not an academic economist:

Without veering too far into amateur psychology, I’ll assert that Powell’s career experience orients his approach much differently than the economists who preceded him. Academic economists tend to be cautious in their public pronouncements, relying on evidence or well-tested theories. Investors, and Powell’s career at the Carlyle Group speaks highly to his prowess, are more willing to play a hunch. We invest without perfect information. It’s hopefully well-reasoned and researched, but all investments have a degree of both risk and faith. Powell seems willing to embrace both.

It’s tempting to think of the recent run of Fed speakers as “The Economists Strike Back,” but that would be superficial and incorrect. The unanimously endorsed FOMC statement and Powell’s press conference offered balanced messages. Investors heard the market-friendly portions, and the other Fed Governors and Regional Presidents felt the need to try to rebalance the market’s outlook. Thus far, the market doesn’t seem to be listening. So, we’ll offer a little pop quiz to see who might be paying attention. (No cheating by clicking on the hyperlinks!)

1. Who said that the stock market “got a little ahead of themselves” with “euphoria”?

a. Atlanta Fed President Raphael Bostic

b. Chicago Fed President Austan Goolsbee

c. New York Fed President John Williams

d. Richmond Fed President Thomas Barkin

2. Who said there is no current “urgency” for the Federal Reserve to reduce U.S. interest rates, adding Inflation “is going to come down relatively slowly in the next six months, which means that there’s not going to be urgency for us to start to pull off of our restrictive stance”?

a. Cleveland Fed President Loretta Mester

b. Chicago Fed President Austan Goolsbee

c. New York Fed President John Williams

d. Atlanta Fed President Raphael Bostic

3. Who said, “If inflation comes down naturally and smoothly, awesome, you know, there’s no particular need to do anything with interest rates if inflation steps down,” and “But if inflation is going to flare back up, I think you want to have the option of doing more on rates”?

a. Richmond Fed President Thomas Barkin

b. San Francisco Fed President Mary Daly

c. Atlanta Fed President Raphael Bostic

d. Cleveland Fed President Loretta Mester

4. Who said, that the benchmark rate “will still be quite restrictive even if we [cut rates] three times next year.”

a. Fed Vice Chair Philip Jefferson

b. New York Fed President John Williams

c. Minneapolis Fed Chair Neel Kashari

d. San Francisco Fed President Mary Daly

5. Who said, “It’s not what you say, or what the chair says. It’s what did they hear, and what did they want to hear,” and “I was confused a bit — was the market just imputing, here’s what we want them to be saying?”

a. Chicago Fed President Austan Goolsbee

b. Richmond Fed President Thomas Barkin

c. Kansas City Fed President Jeffrey Schmid

d. Minneapolis Fed Chair Neel Kashari

6. Who said that financial markets have jumped “a little bit ahead” by penciling in early interest rate cuts next year?

a. Cleveland Fed President Loretta Mester

b. New York Fed President John Williams

c. Fed Vice Chair Philip Jefferson

d. San Francisco Fed President Mary Daly

7. Who said that he expects two quarter-point rate cuts likely in the second half of the year, but emphasized that in the meantime inflation remains too high?”

a. Kansas City Fed President Jeffrey Schmid

b. Minneapolis Fed Chair Neel Kashari

c. Atlanta Fed President Raphael Bostic

d. New York Fed President John Williams

8. Who said, “We aren’t really talking about rate cuts right now”?

a. Dallas Fed President Lorie Logan

b. Cleveland Fed President Loretta Mester

c. Chicago Fed President Austan Goolsbee

d. New York Fed President John Williams

9. Who said, “It is far too early to declare victory, and there are certainly risks.”?

a. Atlanta Fed President Raphael Bostic

b. San Francisco Fed President Mary Daly

c. Fed Vice Chair Philip Jefferson

d. Fed Chair Jerome Powell

10. Who said, “Sure, we know that the median SEP, or dot plot, projection is for 3 rate cuts in 2024. So, by all means, project 6 cuts for 2024 anyway.”?

a. Fed Chair Jerome Powell

b. New York Fed President John Williams

c. Chicago Fed President Austan Goolsbee

d. None of the above

Answers:

1. B

2. D

3. A

4. D

5. A (A topic we’ve discussed previously)

6. A

7. C

8. D

9. D

10. D (!!!)

I hoped you passed this quiz. There’s no penalty if you didn’t – your portfolio is almost certainly much better off if you hadn’t been paying attention to the gloomy messages. Chair Powell decided that he wanted to bring a Christmas gift to investors, and they are quite thankful.

As for me, I’ll be taking a few days off into year-end. So if you don’t hear from me in the meantime, Happy Holidays!!!