Conflicting rhetoric coming from Fed's voters - UOB

Analysts at UOB Group offered insights to the most recent Fed chat of last week.

Key Quotes:

"Chicago Fed President, Charles Evans (voter in 2017 FOMC) who was speaking in Dublin, Ireland, (12 May) provided a surprisingly hawkish stance as he said that he could be okay with one more rate hike if there are more uncertainties about inflation outlook and that he would be very surprised if Fed raises rates more than two additional times this year. He opined that it seems likely the Fed could make balance sheet adjustments before end of the year but he believed that the normal size of balance sheet is going to be substantially more than US$800bn and that the path of balance sheet down to normal level is going to be gradual process, likely 3-4 years. 

Philadelphia Fed President Patrick Harker (voter in 2017 FOMC) who was speaking Drexel University (12 May) in comparison to the dovish Evan said he believed that the US economy is ‘essentially at normal’ with the labor market ‘at full health’ and he repeats support for two more rate hikes in 2017. He expects US unemployment to fall to 4.2% by end 2018. Regarding the issue of reducing the Fed’s balance sheet, he opined the Fed can slow or increase pace of shedding bonds depending on market reaction. He also warned that any acceleration in inflation could mean more than two more rate hikes this year."