January 2025 FOMC Debrief

Hello, my friends. Today is January 29th, and this is my January FOMC debrief. Now, before we talk about what happened today, let's level set a little bit. So the last time we had an FOMC meeting was in December. In December is one of those meetings where you get a dot plot. And at that time, the Fed sent a pretty hawkish message there by penciling in fewer cuts in 2025. So this year, then the market had expected. And since then, the market has been pretty hawkish, pricing sometimes only one cut this year, 2025.

你好，朋友们。今天是1月29日，这是我对1月FOMC会议的回顾。现在，在我们讨论今天发生的事情之前，让我们先简单回顾一下背景。上次FOMC会议是在12月。12月的会议之一是会有一个点阵图。当时，美联储传递了一个相当鹰派的信息，他们计划在2025年减少降息次数，这和市场之前的预期相比更加保守。从那时起，市场一直持鹰派态度，有时在2025年只预测今年会有一次降息。

But more recently, we got inflation data, CPI data, that was much better than expected. And then we had an important FOMC member come out and say that, hey, if inflation continues to be this good, maybe we could cut rates sometime in the first half of this year. So the market began to price in a little bit more dovishness and heading into the meeting, we were pricing in two cuts this year. Now the meeting, well, okay, first, before we get into the meeting, we got the FOMC statement, which surprised the market immediately. When the market saw the statement, it began to, the bonds began to sell off. So rates began to come up a little bit because the statement had made two interesting tweaks.

最近，我们获得了最新的通胀数据和消费者价格指数（CPI）数据，这些数据比预期的要好很多。随后，一位重要的联邦公开市场委员会（FOMC）成员表示，如果通胀继续保持在这种良好的水平，也许今年上半年能够降息。因此，市场开始预期政策会更偏向宽松，并预计在会议前，今年可能会有两次降息。然而，在会议之前，我们首先看到了FOMC的声明，该声明立即让市场感到意外。当市场看到这个声明时，债券开始抛售，因此利率略有上升，因为声明中做了两个有趣的调整。

First off, they had changed the labor market language to show that the FOMC thinks the labor market is strong. So basically, not too long ago, they were worrying about the unemployment rate rising. Now they think the labor market is fine. Again, that's hawkish because the labor market is fine, then you don't have as much reason to cut. And secondly, last time they had an FOMC statement, they were talking about, you know, inflation is making progress, but they deleted that progress part out, which is kind of surprising because we did have progress, right? CPI was better than expected, but that made the market think that the Fed is, you know, not happy with inflation and also that the labor market is stronger than expected. So they were immediately thinking a hawkish Fed.

首先，他们修改了劳动市场的描述，表明美联储公开市场委员会（FOMC）认为劳动市场很强劲。之前不久，他们还担心失业率会上升。现在他们认为劳动市场状况良好。这种态度显得比较强硬，因为如果劳动市场没问题，就没有太多理由去降息。 其次，上次他们发布的FOMC声明中提到，通货膨胀正在取得进展，但这次他们删除了“进展”这一部分。这有点令人惊讶，因为我们确实有了一些进展，对吧？消费者价格指数（CPI）的表现好于预期。但这让市场认为美联储对通胀不满意，并且认为劳动市场比预期更强。这就让市场立即觉得美联储的立场偏向于强硬。

But that turned out to be a head fake because heading into the meeting, we actually got some more clarification from Powell. Let me look, if you just look at the first paragraph, we did a little bit of language cleanup there. We took out a reference to since earlier in the year as it related to the labor market. And we just chose to shorten that sentence. Again, I mean, if you look at the sort of intermeeting data was good and there was another inflation reading, I guess, just before the December meeting. So we got two good readings in a row that are consistent with 2% inflation. Again, we're not going to over interpret too good or too bad readings, but this was not meant to send a signal. As you can see, Powell just kind of struck that off and said that, you know, we just wanted to clean up a language a little bit. I don't know. It seemed like it changed the measures to me. But when the market began to understand that, you know, Jay is just, you know, just, I don't know, wanting to have a shorter statement.

但这结果实际上是一个误导，因为在进入会议前，我们实际上从鲍威尔那里得到了一些更多的澄清。让我看看，如果你只看第一段，我们对一些语言进行了清理。我们删除了关于劳动力市场的“自年初以来”的提及，只是选择缩短那句话。再说一下，如果你看看会议之间的数据是不错的，还有一次通胀读数，我想就在12月会议之前。因此，我们连续得到了两个与2%通胀率一致的好结果。我们不会过度解读两次好的或不好的读数，但这不是为了传递某种信号。正如你所看到的，鲍威尔只是简单地抛开了这些，说我们只是想稍微整理一下语言。我不知道，这看起来像是改变了措施。但当市场开始明白，杰伊只是想要一个简短的声明时，一切就清楚了。

The market began to, again, relax a bit and we saw interest rates come back down, unwinding that sudden knee jerk move higher. Now, in the press conference in particular, this was, I think, widely expected to be a very uninteresting press conference because the market was pricing in basically no change. And there was so nothing really interesting could have come out of it. But Chair Powell was asked on a wide range of topics. And a few of them I thought were pretty interesting. First off, more recently, the Fed put out a statement that they withdrew from this global central bank alliance about greening the financial system and so forth. Many people looked at that and said, you know, this must be because Trump won, so the Fed is adjusting. But Chair Powell actually gave a different answer. He basically said, you know, this alliance here was about all this environmental stuff, biodiversity, pushing banks to be green there. That stuff is just not in our mandate. And I've been trying to get out of this. And, you know, this is something that took time to get out of. It just so happened that the moment that we withdrew was also coincided with the Trump presidency. I don't know if I believe that. I mean, that's what he says. But I imagine if we did have a President Kamala Harris, who is all about the Green New Deal and so forth, I don't know if the Fed, if Chair Powell would also be able to be, would have would be withdrawing from that committee. I don't doubt that he wants to himself, but I don't know if the Fed would be allowed to. So again, he's saying that it's not because of politics. It's just the timing. But I don't know about that. Okay.

市场开始再次放松一些，我们看到利率回落，之前突然跃升的趋势被逆转。关于新闻发布会，我认为大家普遍认为这将是一场非常无趣的发布会，因为市场基本上预期不会有任何变化。因此几乎没有什么特别的事情会发生。但美联储主席鲍威尔回答了许多问题，其中几个我认为非常有趣。首先，最近美联储发表声明退出了全球央行联盟，该联盟关注的内容是金融系统的绿色化等。很多人看到这一点，认为这可能是因为特朗普上台，导致美联储因此做出调整。但鲍威尔主席给出了不同的解释。他基本上表示，这个联盟关注的是环境问题、生物多样性，推动银行绿色发展等。而这些都不在我们的职权范围内，我一直想退出这个联盟。这需要时间来退出，而我们退出的时机恰巧与特朗普当选时间一致。我不知道是否相信他的解释。不过假如卡玛拉·哈里斯当选总统，她支持绿色新政等，我不确定美联储或鲍威尔主席是否还能退出这个委员会。我不怀疑他本人想退出，但我不确定美联储是否会被允许这样做。所以他再次表示这不是因为政治原因，而仅仅是时机问题。但我对此持怀疑态度。

The second thing that I thought was pretty interesting was, of course, a lot of commentary about the relationship between Trump and Powell. Now, Powell made a point that he has not spoken with the President as well. And, of course, did not comment on tariffs or anything like that. Now, in contrast, at the same day today, we had the Bank of Canada come out with, a meeting and a monetary policy report, giving a lot of detailed analysis about, you know, what a tariff scenario would look like to the Canadian economy and potentially to policy as well. So I thought that was pretty strange. I totally understand that Powell doesn't want to have a horse in this race can comment on politics. But come on, that's like the elephant in the room. It's going to have a big impact on the U.S. economy and monetary policy. So, of course, he has thoughts on it. He's just not sharing them at the moment.

我觉得第二件非常有趣的事情是：当然，就是关于特朗普和鲍威尔之间关系的许多评论。鲍威尔特别提到他没有和总统交谈过，而且没有对关税或类似的事情发表评论。相比之下，同一天，加拿大央行召开会议并发布了一份货币政策报告，其中详细分析了关税情景对加拿大经济以及可能对政策的影响。我觉得这挺奇怪的。我完全理解鲍威尔不想参入政治讨论。然而，这就像大家都在关注的焦点，会对美国经济和货币政策产生重大影响。所以，他肯定是有想法的，只是目前没有公开谈论罢了。

Another thing that I thought was interesting was, comment on quantitative tightening. It was good that a reporter asked Powell about his thoughts on quantitative tightening. And this is the only part in the meeting, which was actually very much scripted. Let's take a listen. Let's talk about runoff. So the most recent data do suggest that reserves are still abundant. Reserves remain roughly as high as they were when runoff began. And the federal funds rate has been very steady within the target range. We track up a bunch of metrics and they do tend to point to reserves being abundant. We do intend to reduce the size of our balance sheet to a level that's consistent with implementing monetary policy efficiently and effectively in our ample reserves regime. We're closely monitoring a range of indicators to assess conditions. And that should provide signals whether reserves are approaching a level that could be judged as, quote, somewhat above ample. So as you can see that generally speaking, Powell was just basically having a conversation with everyone. But when it came to QT, he had a written statement prepared. So this is something that is deliberate, something that he anticipated being asked on, and something that he wanted. He didn't want to mess up.

另一件我觉得有趣的事情是关于量化紧缩的评论。很高兴有记者问鲍威尔对量化紧缩的看法，而这是会议中唯一非常有准备的部分。让我们来听听他们的说法。让我们谈谈缩表。最新数据显示，储备仍然充足。储备水平仍与缩表开始时大致相同，联邦基金利率在目标范围内保持非常稳定。我们追踪了一堆指标，它们往往指出储备充足。我们确实打算将资产负债表的规模缩减到一个与我们充裕储备体制下高效和有效实施货币政策相符的水平。我们密切监控一系列指标来评估状况，这应能提供信号表明储备是否接近可以判断为“略高于充裕”的水平。正如你所看到的，总的来说，鲍威尔基本上是在和大家对话，但涉及量化紧缩时，他事先准备了一份书面声明。这是经过深思熟虑的，是他预期被问及的内容，也是他想要避免出错的地方。

So this is very much part of policy. And his answer is that QT is going well and it's going to continue. He doesn't really see any reason to stop that at the moment. And that's what I've been telling my subscribers as well. The last thing that I thought was interesting was right now the Fed is undergoing a monetary policy review. And one of the things that we do in a monetary policy review is not just talk about how the Fed implements monetary policy, but goals as well.

这在很大程度上是政策的一部分。他的回答是量化紧缩（QT）进展顺利，并且会继续下去。目前他没有看到任何停止的理由。这也是我一直告诉我的订阅者的。最后，我觉得有趣的一点是，美联储目前正在进行货币政策审查。在货币政策审查中，我们不仅讨论美联储如何执行货币政策，还会讨论目标。

Now, when inflation was very high, you had people talk about maybe the Fed should raise their inflation target. After all, why would we want to create all this suffering in unemployment simply just to get unemployment rate back down? Now, this is what your Powell had to say. I would not look at changing it anyway, but I certainly wouldn't look at it at a time when you're not meeting it. I mean, there's just no interest at all in changing it, if I'm being at all unclear. We're not going to change the inflation goal. As you can see, he's very adamant telling everyone that, yeah, we're going to change monetary policy, how we do it maybe, but we're definitely, definitely not going to change the inflation target.

现在，当通货膨胀很高的时候，有人讨论美联储是否应该提高通货膨胀目标。毕竟，为什么我们要仅仅为了把失业率降下来而制造这么多失业的痛苦呢？这是鲍威尔对于这个问题的看法。他表示：“我不会考虑改变它，尤其是在实现目标之前。我意思是说，如果我的讲话有点模糊，那就是我们完全没有兴趣改变它。我们不会改变通货膨胀的目标。”正如你所见，他非常坚定地告诉大家，是的，我们可能会改变货币政策的实施方式，但绝对不会改变通货膨胀目标。

Now, not too long ago, the Fed also explicitly released this statement that explicitly stated that they will not change the inflation target, it will remain 2%. What's likely to change in my view is the asymmetry in inflation, whereas the prior framework was designed for a low inflation world such that the Fed would not preemptively race rates even when the unemployment rate was very low, because they thought, you know, inflation is not a problem. They're probably going to take that asymmetry out, whereas going forward, the Fed would be willing to maybe both race rates preemptively when the unemployment rate is very low. And also be less, no longer be asymmetric in the application of average inflation targeting, whereas in the past, oh, actually, in the current framework, the average inflation rate target is asymmetric, whereas when inflation is above target, you know, that's okay.

最近，美联储明确表示，他们不会改变通胀目标，仍然维持在2%。我认为可能会改变的是通胀处理的不对称性。以前的框架是为低通胀环境设计的，即使失业率很低，美联储也不会提早加息，因为他们觉得通胀不是问题。但我认为，他们可能会取消这种不对称性，未来即使失业率很低，美联储也可能会提前加息。此外，他们在平均通胀目标的应用上也可能不再不对称。在过去，也就是在现行框架中，平均通胀目标是有不对称性的，即当通胀高于目标时，他们认为这没关系。

But if it's ever below target, they will commit to have it above target for a few years. So that asymmetry is probably going to go away as well. We'll find out in the coming months. All right, so that's all prepared overall, uneventful meeting, but, you know, we did get some interesting tidbits. All right, talk to all this weekend.

如果未达到目标，他们会承诺在未来几年内将其提高到目标以上。因此，这种不对称可能也会消失。我们将在未来几个月中得知结果。好了，总的来说，这是一场按计划进行的会议，没有重大事件，不过，我们确实得到了一些有趣的信息。好吧，周末再聊。