Recent Fed speaker comments reviewed, hawkish - UOB

Analysts at UOB Group noted the Fed speakers this week and commented below on both Dudley and Harker.

Key Quotes:

"New York Fed President, William Dudley (permanent voter in FOMC) who was speaking in New York on Monday (3 Apr) focused on the growing US student loan debt as one headwind to economic activity, and opined that it could help lower equilibrium Fed Funds rate. In his prepared speech, Dudley warned that “despite an improving labor market, overall delinquency rates on student debt remain stubbornly high, and repayment progress has slowed further, likely reflecting the recent introduction of more accommodative payment plan” and that the soaring US students’ debt burden is creating a barrier to home ownership and economic mobility as well as a potential drag on consumer spending. That said, Dudley believed that making colleges more affordable would benefit US upward income mobility and he noted that the US household sector in unusually good shape given economic cycle. 

Philadelphia Fed President Patrick Harker (voter in 2017 FOMC) who was talking in a Fintech seminar in Philadelphia (3 Apr) said that the Fed could begin trimming bond portfolio late this year or next year, echoing earlier remarks made by NY Fed President Dudley last week (31 Mar). He opined that the balance sheet should shrink portfolio ‘smoothly’ to minimize distortions to market and that he backs ‘treasuryheavy’ portfolio for future. He professed that it is still unclear how much Fed should ultimately shrink balance sheet. As for the rate hike trajectory, Harker supports two more rate hikes this year. Harker also noted that Congressional failure to revamp healthcare law is evidence that the Fed should not jump to conclusions on fiscal stimulus."