Wall Street Reading of Powell's Hawkish Speech: Data Scarcity Leads to Increased Fed Disagreement

On October 30th, in reaction to Federal Reserve Chairman Powell's hawkish speech last night where he said "given the internal differences within the central bank and the limited visibility, a rate cut in December is not a certainty," major Wall Street fund managers provided their interpretations: Brandywine Global Portfolio Manager Jack McIntyre: "With one eye closed while flying, the Fed considers the slowdown in the labor market a more worrying issue than inflation stickiness. Considering that labor statistics are lagging indicators and monetary policy has a time lag, this stance is reasonable. Therefore, for October, the Fed would rather choose to cut rates further just in case. However, the strange range of differences is more difficult to understand. Milan's request for a larger rate cut can be regarded as overly dovish and thus ignored. But Schmidt's opposition to a rate cut, along with Powell's remarks at the press conference - where he expressed a desire for the Fed's view on potential future rate cuts to be somewhat detached from the market's expectations for December - should not be underestimated. This difference implies that the complacency in the financial market will weaken, volatility will increase, and two-way fund flows will become more frequent." LPL Financial Chief Economist Jeffrey Roach: "The downside risks in the employment market are likely to ensure that the Fed continues to cut rates in December and throughout next year." Carson Group Chief Market Strategist Ryan Detrick: "The Fed did not make a big deal. It cut rates by the widely expected 25 basis points and also opened the door for another rate cut in December. Chairman Powell acknowledged the potential problems regarding inflation, but the weakness in the labor market outweighed these concerns, resulting in this rate cut and possible future actions." Oxford Economics US Deputy Chief Economist Michael Pearce: "The decision to cut rates by 25 basis points in October was not surprising, but a regional Fed president's unexpected hawkish difference highlights that future actions are becoming more controversial. We expect the Fed to slow the pace of rate cuts from here. Our view is based on the judgment that the labor market conditions will stabilize, but it is difficult to assert this with the lack of official data."