The Fed's tightening plan comes into focus

If you want to know what it looks like when Federal Reserve leaders decide to send a concerted signal about their plans, well, it looks like what took place Friday.

• Comments from Governor Lael Brainard and New York Fed President John Williams made clear that the central bank intends to raise interest rates only a quarter-percent at its March meeting, then keep raising them steadily over the rest of the year.

Why it matters: The Fed appears committed to moving decisively but steadily toward tighter money — not moving so quickly as to shock markets or the economy unnecessarily.

The backstory: After a high inflation reading on February 10, markets began to price in a near-certainty that the Fed would raise rates by half a percent in March — something it hasn't done in 22 years. St. Louis Fed President James Bullard chimed in, endorsing such a move.

• Market speculation percolated that the Fed could even stage an emergency meeting and vote to raise rates, rather than wait until its scheduled session March 15-16.
• A handful of news outlets, including Axios, reported that an emergency rate hike was highly unlikely and that the Fed was still focused on a conventional quarter-point hike rather than something more dramatic.

The latest comments from Williams and Brainard, in effect, make that official.

The details: Williams told reporters that "there’s really no kind of compelling argument that you have to be faster right in the beginning” in raising interest rates, and that the Fed can "steadily move up interest rates and reassess."

• Brainard said at a conference that it will make sense to "initiate a series" of rate increases at the next meeting, and noted that financial markets have already moved in line with the Fed's intentions.

Between the lines: The comments from two of chair Jerome Powell's top lieutenants appeared to be a deliberate effort to steer financial markets away from expecting actions that might seem panicky.

• Brainard's comments came at the tail end of a panel discussion focused on a different topic, central bank digital currencies. Her tone suggested the comments were carefully prepared. This was no off-the-cuff accident, but rather a deliberate message.

Yes, but: Governor Michelle Bowman, who focuses on banking issues, said in a speech Monday that she favors "prompt and decisive" action to bring down inflation, suggesting there's appetite among some policymakers with a seat at the table to act aggressively.

• Add in Bullard and other hawkish-leaning reserve bank presidents who have a vote on policy this year, and Powell could face one or more dissents over a conventional quarter-percent hike.

The bottom line: High inflation notwithstanding, Powell and his colleagues aren't going to be rushed into an emergency mindset.