Former Vice Chairman of the Federal Reserve: Walsh's speech reversed the Fed's previous logic and now the default choice is to raise interest rates

On August 30, Nick Timiraos, the "sounding board of the Federal Reserve", issued an article saying that Federal Reserve Chairman Walsh had allayed some concerns about his anti-inflation strategy, but also laid the stage for a larger test that may face three weeks later. If the Fed raises interest rates, it could anger the White House in the weeks leading up to the midterm elections. If you do not move, it may reignite the doubts that the speech allayed. Two points in Walsh's speech on Friday specifically suggested that the Fed could raise interest rates next month. The first was that it would be difficult for Walsh to call current financial conditions restrictive. The second point is that the better inflation data over the summer did not convince him that underlying trends were improving. The Fed's default option until Friday was to sit tight unless data was sufficient to support action. Cohen, former vice chairman of the Federal Reserve, said Washi's speech reversed this logic. "He's changed his original assumption and now he's going to raise interest rates unless the data shows it's not necessary." This means that the final decision will depend on changes in the situation ahead of the September meeting, especially the August CPI released on September 11. Cohen said the Fed should not raise interest rates if the data suggests no action is necessary; if the data is firm, it could weaken the argument that inflation is falling back towards the Fed's 2% target. (Jin Shi)