RPT-BUZZ-COMMENT-Fed-speak roundup: cautiously optimistic

Repeats with no changes (originally posted Jan 27

Jan 29 (Reuters) - With markets fully priced for a pause in monetary policy at the upcoming Federal Reserve decision, the focus will be on the accompanying statement and Chair Jerome Powell’s press conference.

Commentary from Fed officials since December – shown in the table below – has been one of less urgency to cutting rates further, thus endorsing Chair Powell’s message at the prior meeting.

The more hawkish members on the committee have voiced their concerns over the rising risk that the disinflationary process has stalled, which in turn has raised questions over the restrictiveness of current policy.

On the flipside, the closely watched Fed official, Christopher Waller, who is often thought as the lead indicator for the direction of travel that the committee is heading, has been somewhat more dovish-leaning.

The rate-setter has suggested that a March cut cannot be completely ruled out, should inflation ease further, while also indicating that the door is open to cutting rates 3-4 times this year, more than the dot plot projection for two 25bp cuts.

On balance, the Fed is likely to reiterate its cautious stance, particularly in light of the backdrop of potentially significant changes to U.S. trade policy which can have a knock-on effect on the monetary side. However, should Powell offer a sense of optionality that a March cut cannot be ruled out, this would likely weigh on the dollar, given markets have priced in 9bps of easing.

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