Fed speak update: consistent with the yield curve debate outlined in the May minute – Nomura

Chair Powell’s comments on Friday at the conference commemorating the 350th anniversary of the founding of the Riksbank – this is generally considered to mark the beginning of the central banking – did not include a policy discussion, as analysts at Nomura explain.

Key Quotes:

“Instead, he focused on highlevel topics related to independence, transparency and central banks’ role in preserving macroeconomic and financial stability. His remarks seem consistent with the drift towards gradual, step-by-step, easing of some of the rules imposed under the DoddFrank Act. Comments this week from other FOMC participants were generally in line with expectations.”

“The yield curve continued to be a topic of interest with the debate roughly aligning with the hawk-dove spectrum. On one side, generally dovish participants, including Kashkari, Bullard, Bostic and Kaplan, appear concerned that continued rate hikes will unnecessarily raise the risk of inverting the yield curve and potentially cause a recession.”

“On the other side, the more hawkish participants, including Mester, seem less concerned. This is consistent with the yield curve debate outlined in the May minutes.”