The Federal Reserve Board of Governors: When assessing the stance of monetary policy, one should not overly emphasize the strength of financial markets.

On November 3, The Federal Reserve Board of Governors member Smilan stated that it is inappropriate to overly emphasize the strength of the stock market and corporate credit markets when assessing monetary policy. He believes that the current monetary policy is still too tight and increases the risk of an economic downturn. In an interview, Smilan stated, “Financial markets are driven by many factors, not just monetary policy.” He used this to explain why he opposed a 25BP rate cut during last week's vote on the first quarter rate cut and leaned towards a 50BP cut instead. He pointed out that in the context of poor performance in interest rate-sensitive sectors like the housing market and pressure in certain private credit markets, factors such as rising stock prices and narrowing corporate credit spreads “do not necessarily tell you how the monetary policy stance is.” (Jin10)