Fed Task Forces Draw Capitol Hill Scrutiny

Summary

Bloomberg's Michael McKee previews Fed Chair Kevin Walsh's first Humphrey-Hawkins testimony, expecting an emphasis on price stability without firm guidance. He discusses the role of new policy task forces, the potential for a smaller balance sheet and corridor system, and the inflation outlook with energy prices posing upside risk to rates.

• Kevin Walsh likely to stress price stability and avoid signaling future rate moves during testimony.
• Lawmakers expected to question Walsh on task forces, balance sheet plans, and inflation.
• Task forces cover AI, data, and balance sheet; diverse members include Doug McMillon and Marc Andreessen.
• Fed may aim for a smaller balance sheet and corridor system with scarce reserves, reducing repo activity.
• Recent Fed minutes showed some members leaning hawkish, wanting a rate hike in June.
• Near-term CPI may tick down on lower gasoline, but rising energy costs could push inflation and rates higher later.
• Markets currently price about 1.5 rate increases by year-end, but outcome highly uncertain.