FOMC Preview: Groupthink is Dead, Now It’s Just Lies

Powell and Jefferson, the most reliable Fed spokesmen, have been silent since the dovish pivot at the December FOMC. But expectations for a March rate cut have varied wildly as other high-ranking Fed officials have made more hawkish statements. This week Waller managed to interpret very strong economic activity as “moderating” in order to square it with falling inflation, impossible within his mental model. But not accepting the data he himself acknowledges, he frets it can’t last. He worries that revisions to seasonal adjustments in CPI will make inflation look less contained, claiming that last year’s revisions “erased” all the progress to date – which is flatly untrue. This is welcome evidence of the end the groupthink that has prevailed throughout this hiking cycle, but also of deep cognitive dissonance. Powell, not a dogmatic trained economist, seems to be immune. We expect him to reiterate his pivot at the January FOMC, and for the first cut to come in March.