Name: Macro Matters: The next Fed chair 'still needs consensus'
Uploaded: 2026-01-29T17:05:44.000Z
Duration: 3 min 47 s
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So is this the end of cuts under Chair Powell?

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The Fed policymakers hit pause this week.

Chair Jerome Powell said the economy had surprised them with its strength.

And it's hard to argue that policy is particularly restrictive now.

Markets are no longer pricing in any further moves before Powell steps down in May.

But the new chair could change everything.

Mark Fleming is chief economist at First American.

Mark, do you think we've seen the last policy moves under Chair Powell?

It's possible, although you never can say anything with certainty.

It's clear based upon less the announcement of the actual no change, but the press conference after that.

There seems to be a sort of more balance between the dual mandates of struggling to bring down inflation versus the labor market.

As you mentioned, the labor market in their assessment is not as weak as maybe they thought at the end of last year.

And so staying put and letting the changes that they made last year sort of work their way through in those long and variable impacts that they talk about and see what happens.

They are still, at least as of the December estimate, suggesting that they will cut more this year, that there'll be continued monetary easing, but

And that could happen in the back half or as you said, with a change in leadership.

Two officials dissented in favor of a cut.

One of them Christopher Waller, who is one of the top candidates to replace Powell.

I think just because there's a new chairman doesn't make a significant difference on the overall committee.

Remember that even the chairman is one of many voting members.

And so you still need to get consensus to change rates.

Even if one of those two were the chairman themselves, well, the market agrees they're not pricing in the kind of steep rate cuts that President Trump has made it clear that he wants to see.

There's actually the opposite risk that if you cut rates too dramatically in this environment, given what the market understands as good economic policy, you could actually, yes, reduce rates at the lower end.

Obviously the Federal Reserve fed funds rate influences shorter term lending and credit rates more dramatically than long term.

But you could have like the bond vigilantes reappear and say that's not good economic policy and actually raise long term rates, which would have negative consequences, of course, particularly in the housing market.

And even if Fed rates do come down then towards the end of the year, will that make much difference for potential mortgage borrowers?

Well, recent history suggests that what the Fed does doesn't really do anything for mortgage borrowers.

The announcement this week, basically the market didn't do anything at all.

Even the rate cuts at the end of last year they reduced the short end, but

the long end of the yield curve stayed the same.

Ten year treasury has been rangebound just over 4% for most of the last few months and so rate cuts don't necessarily portend lower mortgages.

Then could these worries about the independence of the Fed further encourage investors to sell U.S.

assets and push up those longer term costs then?

I think while obviously it's a matter of debate and concern that independence is threatened, most of the academic research suggests that independent Feds create better monetary policy and have more stable markets and are better for an economy than non independent Feds.

The chances of the Fed becoming independent again gets back to this concept of an equal among 12, not just one.

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Macro Matters: The next Fed chair 'still needs consensus'

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