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At the April 29th FOMC meeting, Cleveland Fed President Beth Hammack and two others (Logan and Kashkari) dissented. Unlike most dissents historically, the objection wasn’t about whether to change the Fed Funds rate; it was about the language in the FOMC policy statement. She specifically took issue with the wording: ” In considering the extent and timing of additional adjustments to the target range for the federal funds rate.” Hammack felt such language implied that a rate cut(s) is coming.
A week later, Hammack got a chance to explain her dissent via an NPR interview. Her views paint her as more pragmatic than hawkish. She believes the economy is resilient but has concerns about sustained inflation above the Fed’s 2% target. She notes the Fed has “been missing our 2% objective for the past five years.” Importantly, she questions whether the multiple inflationary shocks are “really independent” and wonders whether consumers and businesses are developing a higher-inflation mindset that may be responsible for higher prices.
Despite her portrayal as a hawk, her comments suggest she is much more in the neutral camp. To wit:
I think our statement should have a pretty neutral stance about whether the next move is down or up or just on hold for a really long period of time.
It’s also important to note that Hammack’s views are flexible, and in our opinion, it’s not fair to label her as a hawk or a dove. She fully acknowledges the unknown future economic and inflationary impacts of the recent surge in oil prices, as well as the possibility that prices could fall sharply due to a treaty. She states:
I need to keep an open mind about the next policy move
Topping the list of economic releases is the BLS inflation update. CPI, for release on Tuesday, is expected to show a relatively high 0.6% increase in inflation but below last month’s +0.9%. The core figure, excluding food and gas, is expected to increase by 0.3%, a tenth of a percentage point above last month’s figure.
PPI is expected to increase by 0.4% and 0.2% for headline and core producer prices, respectively. While inflation estimates are high, the elevated prices of oil and related items, which are driving the price increases, are currently viewed by the Fed and Wall Street as temporary. Thus, the CPI and PPI data are not likely to impact markets unless they are well above estimates.
Retail Sales for April will be released on Thursday. After rising sharply in March by 1.7%, analysts see a more subdued gain of 0.4%. Bear in mind, this is not inflation-adjusted, so higher oil prices are filtering into the data.
The earnings calendar will be relatively quiet this week, with investors’ eyes turning to Nvidia’s (NASDAQ:NVDA) release on May 20.