Fed Chair Powell 'not in a rush' to hike interest rates, market strategist says
In This Article:
Crossmark Global Investments Chief Market Strategist Victoria Fernandez joins Yahoo Finance Live to discuss Fed policy ahead of the March FOMC meeting this week.
Video Transcript
JARED BLIKRE: Welcome back. To hike or not to hike is not the question. It's a question of basis points. Will it be 25, 50? And what to come of that Fed balance sheet? We're going to talk about it with Victoria Fernandez, Crossmark Global Investments chief market strategist. Victoria, always great to see you. And we were chatting over the break here. Powell's kind of in a bind here, but my big question is, is he going to be the adult in the room like Paul Volcker, who was brought in to tackle inflation in the early 1980s, or is he going to lean a little bit dovish, as central bankers are wont to do at various times?
VICTORIA FERNANDEZ: Yeah, so Jared, I think you're right. I think he's going to lean a little bit more dovish for the sheer fact that I think that's what he's wanted to do all along. He was being pushed to really get in there and raise rates. Everyone's saying how far the Fed was behind the curve. So he knows he needs to do something. But I don't think he's in a rush to do anything quickly. You know, he had his whole line about inflation being transitory, and part of it is-- that's true. But a lot of it is longer lasting.
And so at first, that was his reason for not hiking quicker. I think he can use the Russia-Ukraine issues now as another reason to maybe go a little bit slower than what people are thinking. So I think the market might be a little more hawkish than what Powell and company are. He laid out the 25 basis points at the hearings a week and a half ago. And I think he's going to stick with that and then talk more about balance sheet reduction.
BRIAN SOZZI: Victoria, doesn't he have to drop the hammer? We had the producer price index out this morning. It had 10%. It's up 10% over the past 12 months. Gas prices are high. At what point does the Fed, sure, acknowledge what's happening in Russia-Ukraine, but come out here and send the market a strong signal that you might need a 50 basis point hike?
VICTORIA FERNANDEZ: Yeah, Brian, I don't think they're going to do it at this meeting. I mean, maybe we look for the May meeting or the June meeting. If we don't see inflationary pressures pull back a little bit, then maybe that's when they go in and then drop the hammer and do that 50 basis point hike. But I certainly don't think it's going to be at the March meeting.
And I don't think they're going to insinuate that it for sure will be at the May or the June meeting. I think they're going to leave their options open. You know, they like to use that term, "nimble," where they can say if inflation continues at these high levels, they can do 50 basis points. They're going to start talking about balance sheet reduction, and that's a form of tightening. So I think they're going to use the temporary inflation that we're seeing in some of the commodities as cover to stay the course right now.