The Federal Open Market Committee (FOMC) is scheduled to meet this week. This will be their first meeting since President Donald Trump’s historic visit to the Federal Reserve’s new headquarters construction site. The committee is meeting this week. Specifically, they’ll be publicly deliberating on big moves in the feds funds rate, now set at 4.25% – 4.5%. This will be a remarkable meeting with 11 committee votes and the absence of recently appointed Governor Adriana Kugler.
Christopher Waller and Michelle Bowman are likely to dissent. They’re going to push back against a decision to maintain the rate. Both of these officials have hinted at support for a rate cut before, teeing up what could be a highly contentious FOMC session. Minutes from the FOMC’s June meeting showed an unexpected split among policymakers on the direction of monetary policy. In fact, a few members even argued against any cuts to the interest rate this year.
Taken together, the prevailing sentiment within the committee seems to be in favor of leaving the federal funds rate steady at this meeting. Most analysts think any decision on a potential rate cut can be pushed back to September. Julien Lafargue, the chief market strategist at Barclays Private Bank and Wealth Management, cited a compelling base case for a rate cut in September. This forecast is completely predicated on the future economic data.
Recent comments by President Trump have muddied the waters further going into the important meeting. In fact, he has openly called for the resignation of Jerome Powell, the current chair of the Federal Reserve. He floated the idea of firing him, then subsequently retracted that threat. Trump has attributed the FOMC’s decision not to cut rates to Powell’s leadership, further intensifying scrutiny on the chair’s position as his term runs until May 2026.
“The reason the Fed isn’t cutting is not because of Jay Powell.” – Robert Kaplan
The politics behind this week’s meeting are part of the bigger FOMC debate. The June dot plot already indicated that two rate cuts were likely by the end of the year. It laid bare longstanding rifts between those officials over when and if those cuts should be made at all. Reps. Waller and Bowman are true outliers as the only members pushing for a rate cut at this meeting. The others have not expressed a strong desire to back this change.
Former Dallas Fed President Robert Kaplan commented on the consensus within the committee, stating, “The reason the Fed isn’t [cutting] is … there’s not a consensus around the table that it’s time to cut.” He underscored that with the FOMC having 12 voting members, the decision can’t just be up to Powell’s discretion. Kaplan noted that even if a new Fed chair were installed, they would probably still opt against cutting rates in July. He hasn’t backed down from that judgment.
Unlike Waller and Bowman’s encouraging position, it appears that many other officials are scared. As former Fed official Bill English put it, that kind of easing won’t produce any positive effects. Instead, it will just convince them that any compromise will make them look like they’re caving to the president. This view is apparently shaped by the fear of outside forces swaying monetary policy judgments.
As if it wasn’t already, anticipation for this week’s FOMC meeting is off the charts. Market participants are deeply interested in how the committee is going to approach these tricky questions. A recent CNBC poll revealed that only 14% of respondents believe Waller will be nominated to replace Powell, indicating uncertainty about future leadership within the Federal Reserve.