This is an interesting moment for Fed independence because unlike last year, where the question was around whether to lower rates, now it is about whether to hike. Cook has sounded open to raising rates in her recent speeches, subject to inflation failing to make progress as long anticipated. There is also a new Fed chair who has said that Fed independence is "up to the Fed."

The White House is reviving its attempt to remove Fed governor Lisa Cook from the central bank by laying out a process that the Supreme Court said hadn't been afforded to her in which she might answer or challenge its unproven allegations of mortgage fraud

The unemployment rate dropped to 4.09% in July as the number of people looking for work and the number of people counted as unemployed both fell. This lowered the unemployment rate to its lowest level in two years. It was at 4.44% in February and 4.54% in November.

SF Fed President Mary Daly is giving a speech tonight (Thursday morning in Tokyo) laying out a bimodal outlook. She said scenario one had been and remains her base case, but scenario two has really been gaining ground and you should “be thoughtful enough to move it to the front of your desk.” Why didn’t the Fed move in July? She said this isn’t really about fine-tuning. This is about determining whether you’re in a different world, and one that requires a bigger policy adjustment. “We will get more information… and we might have a very different situation” if recent shocks subside.

Fed governor Lisa Cook says she voted to hold rates steady last week because she sees potential for a reduction in price pressures from tariffs, the war, and the AI buildout. But she suggests the bar to hike could be low with the following phrase: "If I do not see signs of continued disinflation soon, I am prepared to act." Given several years of above-target inflation, "while we might be able to afford to wait for longer in a different environment, we do not have that luxury in this one."

Kansas City Fed President Jeff Schmid (non-voter) is the fifth Fed president since last week's meeting to say he would like to raise rates: "Given the strength of demand and investment, I do not see the current stance of monetary policy as restrictive. As such, I believe that bringing inflation down to the Fed’s 2% objective will require tighter policy."

NY Fed President John Williams says he "strongly" supported last week's policy decision and reaffirms the reaction function he sketched out last month. He expects inflation to decline but says "it would absolutely be appropriate" to raise rates if inflation doesn't. "I am quite honestly focused quite a bit on, what are we seeing in the core inflation ​data over the next several months, and is that consistent with a kind of a run rate of inflation moving towards 2% and really on a disinflationary path consistent ​with us achieving our 2% inflation goal on a sustained basis by 2028." "My forecast personally is for inflation to come down in ⁠the second half of this year and come down further next year." "If ​the economy is not on a trajectory that will bring inflation back down to 2% ... it would absolutely be appropriate to act to get us on a trajectory that does bring inflation back ​to 2%.” via Reuters @michaelsderby

Alberto Musalem tells the FT: “Mr Market spoke this week, and I took signal from it.” “The signal emphasised to me that we need to continue to earn our credibility every day with both effective communications and actions as needed.”

Less is more? Fed Chairman Kevin Warsh initiated a discussion around whether to meet on rates fewer than the standard eight times a year @colbyLsmith @bencasselman had it first

The one-month annualized rise in the Dallas Fed trimmed mean PCE measure in June was 1.4%, the lowest since 2020. The 12-month increase was 2.2%, a five-year low. The New York Fed's "multivariate core trend" measure of inflation was 2.75% on the year ended June, vs 3% in May.

The three Fed presidents who dissented in favor of a rate hike have arguably provided more of a rationale for their decision than the majority of the FOMC did in its statement on Wednesday or via the press conference. Here's Dallas Fed President Lorie Logan, essentially restating her view of two weeks ago, that underlying inflation is running closer to 2.5% even after abstracting past recent shocks, which she says justifies a tighter policy stance

Kashkari: “To manage against the risk that high inflation could become entrenched, I would rather tighten policy incrementally as we gather more data on the path of inflation and employment. If inflation remains elevated, in my view, a potential series of small policy moves would be better than waiting and eventually concluding that even bolder actions were necessary.”

Asked Wednesday which inflation measure he relies on, Fed Chairman Kevin Warsh gave "the proper, standard answer"—the PCE price index—then immediately qualified it: "Who knows come after next January what we might say about strategy. I suspect the task forces might have something to add." The comment drew attention from former Fed economists (as did his remarks during his Senate confirmation hearing about looking at trimmed averages). In a client note Wednesday, JPMorgan's Michael Feroli said the latest comments "seem to confirm suspicions that the task forces are just covers to redefine the inflation challenge away." This is what Warsh said 15 months earlier in a speech at the IMF: "[F]requent changes to the Fed's metrics—including its professed preferred measures of inflation—are beneath the high standing of the central bank. Central bank credibility is the coin that purchases American economic strength. In Washington, a central banker can ill-afford to be anything other than a straight-shooter."

Former St. Louis Fed President James Bullard on the July FOMC: "I thought the selloff, the higher yields in the 30 year are kind of nerve-wracking for a central banker." Warsh "needed to do more to create optionality in September, and he didn't do very much of that."

Core PCE prices rose 0.13% in June, the mildest month-over-month gain since March 2025 (a 1.6% annualized rate) The 3-month annualized rate was 2.9% (vs. 2.8% a year earlier) The 6-month annualized rate was 3.8% (vs. 3.1%) The 12-month change was 3.3% (vs. 2.8%)

Warsh's press conference generated more-than-the usual market reaction, and it was as much about what he didn't say than what he did (or what the Fed did): "I don't think it's sustainable, what he's doing, in terms of not saying anything," says Loretta Mester, who spent a decade voting on Fed policy. "I actually want more from my Fed. I want to feel comfortable that the Fed knows what it is doing."

Some highlights from Fed Chairman Kevin Warsh's second press conference: He flags the intermeeting move in real and nominal yields (materially higher, top-decile intermeeting move), frames it as the reduction in forward guidance working as designed: "We haven't done much in 42 days. The markets have done quite a bit." One way to read this is to see the chairman treating market-delivered tightening as a substitute for policy action (for now) as the Fed awaits additional data on inflation trends.

At a NABE seminar, former Atlanta Fed President Raphael Bostic says he hopes the new Fed task forces start from a positioning of understanding why the Fed chose to operate, communicate, analyze etc. the way they did. “Changing just to change makes me nervous,” says Bostic. You “may just change yourself into a third best outcome.” “I hope the impulse to change is tempered by the real work the task force does.”