Remember, two Fed governors (Waller and Bowman) voted to cut rates in the July meeting, dissenting from the majority vote. Both made their cases in public speeches prior to the meeting.
Chris Waller, who is on the list of candidates to become the next Fed Chair, went so far as to say that the Fed had not been following the data, instead had paused the easing cycle on assumptions about tariffs that were (his words) “counter to economic theory.”
And he used the analogy of walking on ice in describing the labor market — he said, “when you start hearing cracks … it’s too late.”
Still, the two dissenters couldn’t convince the rest of the committee, and the Fed held rates steady for a fifth straight meeting in July.
Days later, there was a big negative surprise in the jobs data, which included massive downward revisions to the two prior reports.
That same day, Waller released a statement saying “a host of data argues that monetary policy should now be close to neutral.”
That’s a big statement. Neutral (not restrictive, nor stimulative), based on the Fed’s consensus is 3% – roughly 130 basis points lower than the policy rate.
We’ve since had another bad jobs report, and the largest negative one-off adjustment to job growth (-911k) on record.
That brings us to today’s decision.
Remember, when the Fed started the easing cycle last year this time, with a surprise 50 basis point cut, Powell said the move should be taken “as a sign of [their] commitment not to get behind the curve.”
Trump’s newly appointed Fed governor, Stephen Miran, was at the table over the past two days. As we know, the Trump administration thinks rates should be much lower. Treasury Secretary, Scott Bessent, has argued to start with 50 in this September meeting, and to ultimately get to 150-175 basis points lower.
When it came time to vote, Miran voted to cut rates today by 50 basis points.
He was alone.
Where was Waller? Where was Bowman?
The rest of the committee voted to cut by 25.
What’s the takeaway?
Miran either didn’t make a convincing case to sway other voters to his camp, or the other voters were pressured by the existing Fed regime to show consensus and alignment with Powell, the Fed Chair.
Still, regime change is coming at the Fed, and the market got a view of the policy path from Miran’s participation (i.e. the Trump camp) in the Fed’s Summary of Economic Projections ….
This is the Fed’s ‘dot plot’ — a visual representation of the individual projections from each of the 19 participants in the Federal Open Market Committee (FOMC) meetings. Each ‘dot’ represents a single participant’s forecast for the appropriate level of the federal funds rate at the end of each of the next few years and over the longer run.
It’s safe to assume the lowest dots (circled in yellow) are Miran, which would suggest he is pushing for a fast recalibration, to get the policy rate near the neutral level.
Today, he was a lone dissenter. But the dots make clear how the Trump Fed wants to move.
Miran will be a good interview to watch for in the coming days.
