Federal Reserve officials unanimously defend policy independence while signaling a pause in rate cuts

Breaking News from Mars Finance: On January 15, multiple Federal Reserve officials publicly emphasized the importance of maintaining independence when formulating monetary policy. At the same time, officials generally signaled that the meeting this month might delay interest rate cuts, citing the resilience of the US economy, elevated inflation levels, and the need to keep monetary policy restrictive. In response to subpoenas from the US Department of Justice regarding the renovation project of the Federal Reserve headquarters and whether the related investigation affects policy judgment, several officials pointed out that political or judicial pressure should not interfere with monetary policy decisions. Minneapolis Fed President Kashkari explicitly supported Powell’s stance, stating that the investigation essentially touches on the independence of monetary policy, and that even with a change in leadership, the Fed will continue to make decisions based on data and analysis. Chicago Fed President Goolsbee, Atlanta Fed President Bostic, and New York Fed President Williams also emphasized that the Fed’s rate-setting process is free from political interference and is crucial for maintaining long-term inflation stability. In contrast, Fed Board Member Mester downplayed the impact of the investigation, believing that inflation is returning along the right track, and expressed reservations about some central bank governors publicly supporting Powell. Regarding economic outlook, aside from Mester, most officials hinted that it is unlikely to cut rates again at the FOMC meeting in late January. Kashkari straightforwardly stated that, given the still-high inflation and steady economic performance, rates should remain unchanged for now, but there may be room for a cut later this year. The market generally expects the Fed to restart rate cuts only after June at the earliest. Bostic emphasized that policy still needs to maintain a restraining effect on economic activity, and that the Fed still has a “long way to go” before achieving its 2% inflation target. Overall, there is a growing consensus within the Fed: until inflation clearly declines further, maintaining stable interest rates in the short term is the more prudent choice.