Fed Is Fighting Itself on Rates and Inflation

Fed Is Fighting Itself on Rates and Inflation

Federal Reserve governors appear sharply divided


What Gives?  

Does the rule that you cannot fight the Fed apply if the Fed is fighting itself?

Tuesday saw a clear demonstration that the mixed signals on the economy are dividing the Fed. In speeches given thousands of miles apart, two Trump-appointed Federal Reserve governors appeared to be sharply divided on the question of whether interest rates are likely already high enough to bring inflation back to the central bank’s two percent target.

Fed Governor Chris Waller, who for years ran the economics research program at the St. Louis Fed and was brought to President Trump’s attention by then St. Louis Fed president Jim Bullard, said in a speech in Washington that the pace of the economy appears to have slowed enough to suggest monetary policy is tight enough.

Waller’s talk Tuesday was titled “Something Appears to Be Giving,” a reference to a speech he gave in mid-October with the title “Something’s Got to Give.” In that speech, Waller argued that the recent combination of falling inflation and accelerating growth was likely to be unsustainable. “Either growth moderates, fostering conditions that support continued progress toward our 2 percent inflation objective, or growth doesn’t, possibly undermining that progress,” Waller said.

Waller’s speech Tuesday said that growth does appear to be moderating, which would allow disinflation to continue.

Federal Reserve Governor Christopher Waller at a Fed Listens event in Washington, DC, on Sept. 23, 2022. (Al Drago/Bloomberg via Getty Images)

“I am increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2 percent,” Waller said Tuesday in remarks delivered to an event at the American Enterprise Institute in Washington, DC. “I am encouraged by what we have learned in the past few weeks — something appears to be giving, and it’s the pace of the economy.”

Waller argued that data on economic activity in October indicated that spending is cooling.

“Retail sales fell 0.1 percent, the first drop since March. Spending was down on motor vehicles, an interest-sensitive sector, which may be evidence that that the FOMC’s tightening of monetary policy is having some effect. Spending was also down at gasoline stations, mostly because of a sizable decline in gas prices, often a larger factor for this segment of retail than shifts in demand. But even without motor vehicles and sales at gas stations, retail sales barely increased in October, which may reflect a broad-based moderation in demand,” Waller argued.

Although Waller did not point it out, in real terms the decline was even more marked. After adjusting for the change in consumer prices, real October spending fell 0.2 percent. Consumer demand for goods fell 0.2 percent from the month prior in nominal terms. In real terms, goods spending fell 0.6 percent, according to the Conference Board.

Waller also pointed out that the labor market appears to be cooling off and there are signs that manufacturing and non-manufacturing activity by businesses slowed in October.

Bowman Stands Ready to Hike Further if Inflation Stalls

Fed Governor Michelle Bowman, in a speech to bankers and businessmen in Utah, was far less sanguine, describing the recent economic data as “uneven.”

“My baseline economic outlook continues to expect that we will need to increase the federal funds rate further to keep policy sufficiently restrictive to bring inflation down to our 2 percent target in a timely way,” Bowman said.

In her speech, Bowman went through an extensive list of reasons to be wary that the disinflationary pressures that brought inflation down in recent months will continue to dominate. She noted that much of the progress in the past year has come from the supply side—including supply chain improvements, increases in labor force participation, and falling energy prices—but that it is unclear if they will keep putting downward pressure on prices. The inflation-dampening improvements from supply side, she implied, may run out of steam.

Federal Reserve Governor Michelle Bowman (right) and Chairman Jerome Powell at Fed Listens event in Washington, DC, on Oct. 4, 2019. (Zach Gibson/Bloomberg via Getty Images)

Bowman also pointed to the risk that higher services consumption could create sticky inflationary pressures and the lack of fiscal restraint in government spending was an ongoing danger…


Header featured image (edited) credit:  Fed group picture/iStock, Drew Angerer /Getty Images

Emphasis added by (TLB)



Stay tuned to …


The Liberty Beacon Project is now expanding at a near exponential rate, and for this we are grateful and excited! But we must also be practical. For 7 years we have not asked for any donations, and have built this project with our own funds as we grew. We are now experiencing ever increasing growing pains due to the large number of websites and projects we represent. So we have just installed donation buttons on our websites and ask that you consider this when you visit them. Nothing is too small. We thank you for all your support and your considerations … (TLB)


Comment Policy: As a privately owned web site, we reserve the right to remove comments that contain spam, advertising, vulgarity, threats of violence, racism, or personal/abusive attacks on other users. This also applies to trolling, the use of more than one alias, or just intentional mischief. Enforcement of this policy is at the discretion of this websites administrators. Repeat offenders may be blocked or permanently banned without prior warning.


Disclaimer: TLB websites contain copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available to our readers under the provisions of “fair use” in an effort to advance a better understanding of political, health, economic and social issues. The material on this site is distributed without profit to those who have expressed a prior interest in receiving it for research and educational purposes. If you wish to use copyrighted material for purposes other than “fair use” you must request permission from the copyright owner.


Disclaimer: The information and opinions shared are for informational purposes only including, but not limited to, text, graphics, images and other material are not intended as medical advice or instruction. Nothing mentioned is intended to be a substitute for professional medical advice, diagnosis or treatment.

1 Comment on Fed Is Fighting Itself on Rates and Inflation

  1. $2.5 million per hour is leaving Australian shores and headed to the US to subsadise the US/Israel war machine –

    Australia pays $2.5 million per hour in interest to the Jewish owned RBA parasite which produces nothing but numbers called dollars as an interest bearing debt. The Labor party pretends that it has “balanced the budget” and is “getting inflation under control”. Inflation will never be under control until Australia restores the governments original Commonwealth Bank which traitors in politics sold to foreign interests in the United States.

    “Trillion-dollar debt delayed but interest bill accelerates to $2.5m an hour
    By Shane Wright and David Crowe
    May 4, 2023 — 10.30pm

    The federal government has delayed the point at which its total debt exceeds $1 trillion as it comes within sight of balancing the budget this year on the strength of unexpectedly high commodity prices and record numbers of people in work.

    Despite the rapid improvement in the budget bottom line, taxpayers will spend more than $110 billion over the next five years paying the interest bill on government debt, a bill larger than family tax benefits or childcare subsidies…………”


Leave a Reply

Your email address will not be published.