FOMC Recap: Like Super Bowl Media Day, But For Interest Rates - And Just as Meaningless on the Outcome of the Game

For all of the AI breakthroughs the models still can't spell. 

This FOMC Meeting feels like the somewhat boring two-week period leading up to the Super Bowl.  We know the two teams and we're just waiting to see them play. In the meantime, we just get lots of talk and "media days", like today.

The two teams in this year's upcoming "Economic Super Bowl" are team money-printer (i.e. monetary policy) and team tariff (or more broadly, fiscal policy).  Perhaps these are the wrong monikers for the two teams, but I think the idea “r-star” vs. “fiscal r-star” has some merit in my opinion.  After all, Powell has characterized the current path of fiscal policy as “unsustainable” and a “threat to the economy” over time.

If you’re unfamiliar with the concept of “fiscal r-star”, an idea coined by Marijn Bolhuis at the IMF, I encourage you to read my post here.  

As for the meeting, here were the “important” points:

• The Fed held their policy rate at 4.25% - 4.50%.
  
• Vote unanimous. Labor market ‘solid.’ Inflation still ‘somewhat elevated.’ Oh, and they cut the line about inflation progress—but Powell insists it’s just ‘language cleanup,’ not a shift in tone.

It really feels like a less entertaining “media day” leading up to the big game.  Lots of talk, little action. At least on Super Bowl media day you get some interesting questions and funny exchanges.  At the next Fed Listens event, I will offer up that Stephen A. Smith and Christopher “Mad Dog” Russo be required participants at every FOMC press conference going forward.  Can you imagine Stephen A. starting his line of questioning with something like “Mr. Powell, you got some explaining to do!” or Russo responding to Powell with something like “Why won’t you answer the question?!”  Relatedly, is the Fed really not taking any responsibility for the increase in “term premium”?  Apparently not.

In addition to the many questions around Trump related policies that you knew Powell wasn’t going to touch with a ten-foot pole, Powell did get a few questions where I thought we might have a shot at getting a real answer.  For example, he got asked about the recent AI sell-off, whether he had any concerns about “bubbles”, a question about “uncertainty” and one about crypto.  Unfortunately, like other questions, even these are the types of questions you know the players media handlers have already trained the player to provide a non-answer. 

At some level, I would have rather seen someone ask Powell what he ate for lunch today, to name his favorite Ninja Turtle, or asked “If you were a tree, what kind of tree would you be?” or just ask him who he thinks might win the Super Bowl. Answers to any of these questions might have allowed us to form a better opinion on the economic outlook than the questions asked today which all got “non-answers.”

At least leading up to the Super Bowl we get to watch game highlights in addition to hearing all the punditry. Maybe the FOMC Press Conferences should have more visual effects?  I’d like to see Powell up there dissecting the economic data and forecasts the way an NFL analyst breaks down game film. I’ll offer that up as feedback at the next Fed Listens event as well.

As is the case with punditry and speculation in general, none of it directly impacts the outcome of the game.  It’s questionable whether any of the punditry and talk carries any information at all or if it’s just noise. 

The Super Bowl gives everyone an opportunity to place their bets on just about anything related to the game, our financial markets offer the same.  Market participants place their collective bets about the future of the economy, including any of a myriad of prop bets. Like fans of the Eagles and the Chiefs can bet on their team, in markets we have those who may see a continued “soft landing” as the favorite while others may feel strongly that “higher for longer” will prevail and can bet directly on interest rates.  If you want to make a prop bet, the Super Bowl offers an incredible variety, are our financial markets all that different, have you seen memecoins and triple leveraged etfs?

Like the lead up to the Super Bowl, there are too many “what if” scenarios to parse.  In the case of the Super Bowl, the outcome might be very different if a player like Barkley or Mahomes were to get injured.  In the case of the economy there are a ton of “what if” scenarios related to tariffs, tax policy, immigration and other fiscal topics that are likely to have an impact on the outcome for economic growth, inflation and employment.  Powell cited a panoply of things that could ultimately decide the outcome of his game.

My advice to Powell remains largely unchanged since my January 2024 post which you can and should read here.  At this point, Powell’s game plan seems set—he’s running out the clock until something forces him to call an audible. Will it be tariffs? Taxes? A surprise market fumble? Just like the Super Bowl, we’ll only know when the real action starts.