OPINION
Market Rating Before FOMC MeetingJan 31
Notes from Biden-Powell Meeting
Following Powell's second 4-year tenure, the meeting, which was held at the White House, with the participation of Treasury Secretary Janet Yellen, mainly focused on the U.S. and global economy and developments such as inflation, which was at the peak of 41 years.
Before the meeting, which took place with Biden's message that the anti-inflation plan begins with respect for the independence of the FED, it was a constructive discussion, as reported by the director of the National Economic Council, Brian Deese. Without going into the specifics of the meeting, Deese said the president emphasized that the FED will be given the latitude it needs to fight inflation. Biden expressed the view that inflation can be lowered without jeopardizing job creation and pledged to continue reducing the federal deficit to ease price pressures.
On the other hand, White House spokeswoman Karine Jean-Pierre noted that President Biden is aware of the difficulties American families are experiencing and will do everything in her power to lower the price of gasoline at the pump.
As a matter of fact, President Biden, in the article he wrote in the Wall Street Journal before meeting with Jerome Powell, underlined that the FED has the primary responsibility to control inflation, and said, "Previous presidents humiliated the FED and made the decisions of the central bank inappropriate in times of high inflation. They tried to influence somehow. I will not do that.” Biden also pointed out that the cost of everyday goods would be reduced by repairing broken supply chains and eliminating exorbitant wages.
On the other side , the statement of former Fed chair Janet Yellen that she made last year that inflation would not pose a problem in the country was wrong. At this point, Yellen drew attention to the effects of the closures in China and the Russia-Ukraine war on the economy and said, "Inflation is the biggest concern for President Biden."
The critical meeting took place with the expectation that Biden would avoid focusing on monetary policy. On the other hand, we are watching the pressure on relatively risk-sensitive assets in the hope that the FED will not let up on monetary tightening to bring inflation down to a 41-year high. In the coming period, louder messages from members of FED to raise the policy rate above neutral levels may also support these dollar pressures.
