Source item

1/3 I've been arguing that Fed watching is now vote-tallying (as explained in the repost). With Waller suggesting he will hold, this means the September vote is 6 (hold) - 5 (hike) - 1 (unknown). The unknown is Jay Powell. He could be the decider. Here is my vote-tallying cheat sheet. 2/3 Powell has not spoken publicly since his May press conference, hoping to fade into the background. But now, if everyone votes consistently with their public statements, Powell’s vote carries some weight. This is why the probability of a hike is effectively 50/50 less than two weeks before the meeting. 3/3 Since 1936, there has never been a 6 – 6 vote. The closest was 6 – 5 in 1963, 1964, and 1973. The Federal Reserve Act contains no provisions for a tie. Presumably, this would mean the status quo holds, as nothing has been agreed to, and the Fed continues to keep the funds rate steady. Of course, they can agree to hold a second (or third) vote until they break the tie. Follow-up If the FOMC vote in two weeks doesn't turn out close and winds up being a 10-2 to 12-0 vote, that means several voters "caved" from their stated positions and went along with the Chairman. This means the Fed remains only the Chairman's opinion. Trump will see this as a signal to go after Warsh hard to get them to cut rates. In other words, the Fed has lost its independence. They need an 8-4, 7-5, or 6-6 vote to preserve their independence.