Stay the Course: New Survey Finds Former Federal Reserve Insiders Urging Policy Stability Concerns About the Economy

A new survey of former Federal Reserve officials and staff members has found support for holding rates steady at the central bank’s May policy meeting, despite calls by President Donald Trump for swift rate reductions. Respondents to the survey say the central bank should hold policy steady until the economic outlook becomes clearer. The nation’s central bank will hold its third two-day rate-setting session of the year on Tuesday, May 6, and Wednesday, May 7, with markets trying to anticipate how the Federal Open Market Committee and Fed Chairman Jerome Powell will respond to a shifting economic outlook. 

The survey also showed broad support for Powell’s low-key approach to handling political pressure from the White House.

Conducted by Jon Hilsenrath, a former Wall Street Journal economics writer and Visiting Scholar at Duke, in partnership with the Duke University Department of Economics, the survey includes insights from 18 former Fed governors, regional bank presidents and staff members collected from April 24 to May 2.

“The group of former Fed officials gave Chairman Powell high marks for his handling of critiques by the President and urged him to stay consistent with his low-key, non-confrontational communication strategy with regard to political pressure,” Hilsenrath said. “No one who responded recommended that Powell alter his approach in the face of challenges from the White House.”

Respondents were asked two questions in the brief survey: 

• What message should the Fed convey about the economic and monetary policy outlook at its May meeting?
• The President has made a range of public comments in recent weeks about monetary policy and Federal Reserve leadership. Do you think Mr. Powell has responded appropriately to the President's commentary and criticism, and how might Mr. Powell alter his approach, if at all?

While some circumstances might make it appropriate for the Fed to act pre-emptively to the risk of recession by cutting interest rates, one respondent said such an approach isn’t warranted now. “Powell has communicated that the FOMC won’t move without seeing the hard data show evidence of weakness in the economy,” this person said. “In some cases, that might be the wrong approach in that it will be too late to get out in front of a slowdown. But in this case, the slowdown in the real economy would need to be balanced against inflation, and if they act early to ease policy with inflation already rising from tariffs, that would not be good.” 

View the complete survey report for more details as well as more quotes from participants. Among the key findings from the survey: 

• A central theme is the need for the Fed to acknowledge both inflationary risks and downside risks to growth and employment. Futures markets indicate that investors see a modest chance of a Fed interest rate cut of a quarter percentage point by June and as many four quarter-point rate cuts by year-end. The group said the Fed should wait for hard data to assess the economy’s performance before undertaking any action, even at the risk of moving too slowly.
• Price stability and stable inflation expectations must be a top priority, many former officials said. Inflation, as measured by the Fed’s preferred personal consumption expenditure price index, was up 2.5% in the first quarter from a year earlier, while core inflation, which excludes volatile food and energy components, was up 2.8%. The indexes have lost some downward momentum in recent months. The Fed’s target is 2% inflation.
• The former officials widely agreed that Powell has responded appropriately to President Trump’s criticism, by focusing on economic fundamentals and avoiding confrontation.

This week's meeting is one of eight held throughout the year by the FOMC to discuss and set monetary policy.  

"Many investors have been expecting the central bank to cut interest rates aggressively this year," Hilsenrath said. "The prospect of delay is rising as the Fed assesses the slowly-emerging impact of tariffs and uncertainty on the economy." 

This survey was in addition to the primary survey conducted by Hilsenrath leading up to the March, June, September and December meetings of the Federal Open Market Committee, with survey results to be release several days before each meeting. Interested in receiving future releases from the survey? Join the mailing list.