Fed rate vote cut may increase market volatility, analysts say
US Federal Reserve Chair Jerome Powell announced a reduction in rate-vote meetings from next autumn. Analysts warn that less frequent adjustments could lead to larger rate changes and greater market reliance on individual members' comments, increasing volatility.
US Federal Reserve Chair Jerome Powell has announced that from autumn next year the Federal Open Market Committee will reduce the number of its interest-rate voting meetings, refocusing sessions on broader monetary policy strategy. The change has prompted mixed assessments from Hong Kong-based analysts.
Ryan Lam, head of research at Shanghai Commercial Bank, said that fewer voting meetings mean the frequency of policy adjustments could fall, raising the chance of a 50-basis-point rate move. Between meetings, he argued, markets will rely more heavily on interpreting individual committee members' remarks, which could increase volatility.
Lam estimated that next year's strategy sessions would be held after the global central bank conference in Wyoming, and that the October rate-vote meeting would most likely be cancelled. He predicted that the two strategy meetings in 2028 could also take place in the second half of the year, concentrating any rate-change window in the first nine months of each year. Should a financial emergency arise, he said, the Fed could still convene an emergency meeting, so its crisis-response capability would not be diminished.
Tony Luk, chief executive of Swan Asset Management, took a different view. He said that reducing the number of voting meetings would make the information disclosed each time more concrete, and he did not believe the change would make the Fed's policy direction harder to predict.