EMISSIONS: UKAs Rise On Week Amid ETS Relink Talk

Chair Powell’s semi-annual Congressional testimony more or less repeated the themes of the January FOMC meeting press conference – sometimes verbatim (“we do not need to be in a hurry to adjust our policy stance”) –  and he sounded cautiously optimistic on inflation even after the January print (“I would say we're close, but not there on inflation.”) But he sounded more hawkish on the labor market front after January's employment data, telling the Senate Banking Committee that the labor market was "very strong".

• Powell is among the more dovish members of the Committee at this point, but it’s worth noting that the other prominent dovish-leaning members have taken a more cautious tone as well.
• NY Fed President Williams called policy “modestly” restrictive, a term that has been used by hawks and could be considered less dovish vs his previous commentary in mid-January ("somewhat restrictive”).
• Chicago's Goolsbee, a 2025 voter, said that despite his view that called January's CPI data "sobering" and said "there’s no question, if we got multiple months like this, then the job is clearly not done” Gov Kugler: "the prudent step is to hold the federal funds rate where it is for some time" VC Jefferson noted “I do not think we need to be in a hurry to change our stance”.
• Gov Waller called January's CPI "mildly disappointing...the data are not supporting a reduction in the policy rate at this time…if this wintertime lull in progress is temporary, as it was last year, then further policy easing will be appropriate. But until that is clear, I favor holding the policy rate steady."
• Boston's Collins (notably, pre-jobs and inflation data): "it's really appropriate for policy to be patient, careful, and there's no urgency for making additional adjustments, especially given all of the uncertainty, even though, of course, we're still somewhat restrictive… what I would say is, again, there is more to do".
• And SF's Daly "At this point, policy needs to remain restrictive until, from my vantage point, until I see that we are really continuing to make progress on inflation.”
• Philadelphia's Harker took a longer-run view: "While I won't commit to a specific timetable, I remain optimistic that inflation will continue a downward path and the policy rate will be able to decline over the long run".

• US TSY 17W BILL AUCTION: HIGH 4.215%(ALLOT 60.66%)
• US TSY 17W BILL AUCTION: DEALERS TAKE 29.82% OF COMPETITIVES
• US TSY 17W BILL AUCTION: DIRECTS TAKE 11.86% OF COMPETITIVES
• US TSY 17W BILL AUCTION: INDIRECTS TAKE 58.32% OF COMPETITIVES
• US TSY 17W BILL AUCTION: BID/CVR 3.33

Since the January meeting, FOMC participants have become more hawkish – or at least, more patient. We go through all relevant FOMC member commentary since the last meeting in our Minutes preview (PDF here).

• That’s particularly the case since the Feb 7 release of January’s employment report which among other things showed an unexpected dip in the unemployment rate to 4.0% from 4.1%.
• And while multiple doves expressed optimism that January’s strong CPI print doesn’t portend a deviation from the path to 2% or preclude rate cuts this year, they have likewise acknowledged that a near-term easing looks out of the question and that any reductions will require more evidence of disinflationary progress.
• Continued uncertainty over potential tariff/fiscal/immigration shifts under the Trump administration have been flagged by multiple participants as grounds to remain patient until the impact can be assessed.
• We have shifted the dots in our Hawk-Dove Spectrum toward the hawkish end pretty much across the board – with sentiment toward a prolonged hold seemingly building.