Fed's Brainard Shifts Policy Stance, Signals Caution on Rate Hikes

ME News reports that on August 5 (UTC+8), Nick Timiraos, known as the "voice of the Fed," wrote that U.S. Treasury Secretary Bessent’s policy reaction function has shifted to become less dovish. His statements this year have suggested that the Fed should maintain interest rates at their current level. Earlier this year, Bessent cited models indicating that the Fed’s interest rate could be 25 to over 100 basis points above the neutral rate. On August 4, Bessent presented two viewpoints. First, he defended Walsh’s decision last week not to articulate any policy reaction function: “I believe each meeting should remain open, and market participants should make their own judgments. I think Walsh wants to preserve flexibility to achieve the best outcome.” Second, he did propose a set of policy responses that could be interpreted as dovish, advocating that recent shocks be ignored: “What impact will rising short-term rates actually have? We’ll have to wait and see.” He raised this question but then responded by noting that underlying inflation is “very mild. Very stable.” He added, “In core inflation, excluding volatile components heavily influenced by energy, the rest has remained very stable. I believe this situation will persist.” (Source: BlockBeats)