A consensus view on Wall Street for a rate cut next month doesn’t mean there will be a consensus on the Federal Reserve as policymakers still appear divided.
In his Jackson Hole speech on Friday, Chairman Jerome Powell opened the door to a rate cut at the central bank’s meeting in September after months of maintaining a more hawkish stance, stoking a furious rally on Wall Street.
His emphasis on growing risks to the labor market coupled with a more muted warning on the inflationary impact of tariffs marked a shift in his tone. But not everyone on the Federal Open Market Committee sounded as dovish, including Kansas City Fed President Jeffrey Schmid.
That sets up another FOMC meeting with dissenting votes, after two policymakers voted to lower rates last time, going against the majority that kept rates steady.
While Powell counts as one vote on the FOMC, he carries outsized influence as the chairman and could prove to be decisive in another split vote.
“Guidance from a range of Fed speakers was mixed this week, while the July minutes struck a modestly hawkish tone,” JPMorgan economists led by Bruce Kasman wrote in a note on Friday. “A consensus decision in September looks unlikely, and it is Chair Powell who holds the key to the meeting’s outcome.”
Another contested meeting would mark further deviation from the Fed’s traditional consensus-driven decision-making process, which typically results in unanimous votes.
But future meetings could see continued division as hawks point to inflation still running above the Fed’s 2% target and other economic data signaling resilience. Indeed, the composition of the Fed is in flux, potentially leading to more push and pull among policymakers.
Stephen Miran, who has previously blasted the Fed’s consensus-based approach, is set to join the board of governors and add to the dovish votes. Meanwhile, Powell’s term as chair expires in May, and President Donald Trump has threatened to…