Wall Street interprets Powell's hawkish speech: Lack of data leads to greater divisions within the Fed

On October 30, in response to Powell's hawkish remarks last night, “Given the internal divisions within the Central Bank and limited visibility, a rate cut in December is not a foregone conclusion,” major fund managers on Wall Street interpreted it as follows: Brandywine Global portfolio manager Jack McIntyre: “In a situation where the Fed can only keep one eye open, it recognizes that the slowdown in the labor market is a more concerning issue than the stickiness of inflation. Given that labor statistics are lagging indicators and that there are lags in monetary policy, this stance is reasonable. Therefore, for October, the Fed would prefer to choose further rate cuts as a precaution. However, what is harder to understand is the strange range of divergence. Milan's call for a larger rate cut can be seen as overly dovish and ignored. But Schmidt's opposition to a rate cut, coupled with Powell's comments at the press conference—where he stated the desire to maintain some distance between the Fed's views on potential future rate cuts and market expectations for December—cannot be overlooked. This divergence implies that complacency in financial markets will weaken, volatility will increase, and bidirectional capital flows will become more frequent.” LPL Financial chief economist Jeffrey Roach: “The downward risks within the job market are likely to ensure that the Fed continues to cut rates in December and throughout next year.” Carson Group chief market strategist Ryan Detrick: “The Fed did not go off the rails by cutting rates by 25 basis points as widely expected, while also keeping the door open for another rate cut in December. Chairman Powell acknowledged the potential issues regarding inflation, but the weak labor market has overshadowed these concerns, leading to this rate cut and potential future actions.” Oxford Economics U.S. deputy chief economist Michael Pearce: “The decision to cut rates by 25 basis points in October was unsurprising, but an unexpected hawkish dissent from a regional Fed president highlights that future actions are becoming more contentious. We expect the Fed to slow the pace of rate cuts from here. Our view is based on the judgment that labor market conditions will stabilize, but it is difficult to assert this in the absence of official data.”