US Fed minutes could show whether Waller and Bowman had company in favoring rate cuts soon
Last month's decision by the U.S. Federal Reserve to hold interest rates unchanged prompted dissents from two top central bankers who wanted to lower rates to guard against further weakening of the job market, and a readout of that two-day gathering on Wednesday could show whether their concerns had started to resonate with other policymakers, perhaps reinforcing expectations that borrowing-cost reductions could begin next month.
Not even 48 hours after the conclusion of the July 29-30 Federal Open Market Committee meeting, data from the Labor Department appeared to validate the concerns of Fed Vice Chair for Supervision Michelle Bowman and Governor Christopher Waller when it showed far fewer jobs than expected were created in July, the unemployment rate ticked up and the labor force participation rate slid to its lowest since late 2022.
More unsettling, though, was an historic downward revision for estimates of employment in the previous two months. That revision erased more than a quarter of a million jobs thought to have been created in May and June and put a hefty dent in the prevailing narrative of a still-strong job market. The event was so angering to President Donald Trump that he fired the head of the Bureau of Labor Statistics.
Data since then, however, has provided some fodder for the camp more concerned that Trump's aggressive tariff regime risks rekindling inflation to hold their ground against moving quickly to lower rates. The annual rate of underlying consumer inflation accelerated more than expected in July and was followed by an unexpectedly large jump in prices at the producer level. "The minutes to the July Federal Open Market Committee will give a more nuanced sense of the split on the committee between the majority that voted to leave rates on hold and the dovish bloc led by dissenting Governors Miki Bowman and Christopher Waller," analysts at Oxford Economics wrote ahead of the minutes release, set for 2 p.m. ET (1800 GMT) on Wednesday. "However, the minutes are more stale than usual since they predate the revised payroll figures, which prompted a rapid repricing of the probability of a September rate cut."
Heading into the release of the minutes, CME's FedWatch tool assigns an 85% probability of a quarter-point reduction in the Fed's policy rate from the current range of 4.25%-to-4.50%, where it has remained since December.Another reason the minutes may feel stale on arrival is they come just two days before a highly anticipated speech from Fed Chair Jerome Powell at the annual economic symposium near Jackson Hole, Wyoming, hosted by the Federal Reserve Bank of Kansas City.Powell's keynote speech on Friday morning - set to be his last Jackson Hole address as Fed chair with his term expiring next May - could show whether Powell has joined ranks with those sensing the time has come for steps to shield the job market from further weakening or if he remains in league with those more wary of inflation in light of its moves away from the central bank's 2% target. The lack of Fed rate reductions since Trump returned to the White House has agitated the Republican president, and he regularly lashes out at Powell for not engineering rate cuts. Trump is already in the process of screening possible successors to Powell and after the unexpected resignation earlier this month of one of the seven Board of Governors members, he has a chance to put his imprint on the Fed soon.He has nominated Council of Economic Advisers Chair Stephen Miran to fill the seat vacated by Adriana Kugler, a term that expires at the end of January. It is unclear whether Miran will win Senate confirmation before the Fed's September 16-17 meeting.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Mint
2 minutes ago
- Mint
Trump turns up the heat. Fed Chair Jerome Powell tries to keep his cool.
Minutes before his congressional testimony this summer, Jerome Powell sat alone, staring straight ahead in the wood-paneled chamber, appearing deep in thought. The Federal Reserve chair later told an associate he felt locked in, prepared for questions about the central bank's chief roles—keeping inflation low and Americans employed. Powell looked steeled for criticism, and he didn't have to wait long. A Republican ally of President Trump, Ohio Sen. Bernie Moreno, launched into a theatrical beatdown an hour into the hearing. He accused Powell of partisanship for comments linking Trump's tariffs with the potential for higher prices and a slowing economy. 'I don't comment on tariffs at all, actually," Powell said. 'I comment only on inflation." Ignoring him, Moreno said inflation was going down, echoing a Trump talking point. The president has demanded an immediate rate cut and disparaged Powell's integrity and intelligence for failing to comply, calling him a knucklehead and a moron. Trump himself nominated Powell for the job in 2017. 'We got elected by millions of voters," Moreno said as his time expired. 'You got elected by one person, and he doesn't want you to be in that job." Powell raised an eyebrow, clicked off his microphone and turned to face the next senator's questions. It was just another day for the Fed chair, who wakes up every morning under siege by critics, led by Trump, who say inflation has been tamed and the economy is ready for a rate cut. Powell and many others have a wait-and-see view. Fed Chair Jerome Powell waiting to testify at a Senate committee hearing on June. 25. Powell's remarks Friday at the annual economic symposium in Jackson Hole, Wyo., will be closely watched by investors and Washington policymakers. Everyone with skin in the game, which is just about everyone who carries a wallet, has reason to listen for clues about when rates might fall. To Powell, the Fed's survival as a central bank that operates outside of partisan control, which he considers a pillar of national prosperity, will depend on how it navigates the current economic moment. Those who have worked closely with him say he is focused almost exclusively on making the right decisions, relying on lessons gained from steering the Fed in the pandemic and then being slow to tackle the worst inflation spike in decades. 'I think it is no more subtle than he wakes up every day and probably goes to bed every night thinking, 'What can I do to preserve the institution?'" said Richard Clarida, who served as the Fed's No. 2 during the first half of Powell's tenure. The political pressure reached a surreal peak during Trump's surprise visit last month to the renovation project at Fed headquarters. White House advisers had spent weeks heaping blame on Powell for cost overruns. Trump and Powell, each wearing white hard hats and suits, toured the dusty construction site. In front of TV news cameras, Trump motioned Powell to stand closer to him and then declared that costs to renovate two historical buildings had climbed to $3.1 billion from $2.5 billion. Powell shook his head, and Trump handed him a printout prepared by White House staff. Powell easily found what he needed to dispute the president's claim. 'You just added in a third building," he said, one that had been completed years earlier. Trump later smoothed things over and declared that the meeting with Powell went well. 'There was no tension," the president said. On Wednesday, Trump called for the immediate resignation of Fed governor Lisa Cook, who has consistently voted with Powell, over allegations of mortgage fraud before her Fed appointment. The president told aides he is considering firing Cook, according to people familiar with the matter, which would leave a vacancy for him to fill. 'I have no intention of being bullied to step down from my position," Cook said. 'I do intend to take any questions about my financial history seriously as a member of the Federal Reserve and so I am gathering the accurate information to answer any legitimate questions and provide the facts." President Trump handing Fed Chair Jerome Powell a tally sheet last month showing costs for renovations at the Federal Reserve in outside the Marriner S. Eccles Federal Reserve building in Washington last month. The Jesuit-educated Powell leads an institution that is an easy target for politicians because, like the Vatican, the Fed has authority but no army. Powell has told associates that despite looking older, he doesn't feel worn down by the pressure. He has maintained what he calls, at age 72, the best physical shape of his life, swimming three times a week and working out with a personal trainer. The regimen helps Powell manage stress, though the weight of decisions affecting millions of Americans sometimes wakes him in the middle of the night. Powell draws strength from an outpouring of support, voiced privately by lawmakers of both parties, bank executives and the occasional stranger who approaches him at the airport or gym. He keeps letters from people who thank him for his steadiness. 'He has a really strong sense of what he's doing there and why," said Jon Faust, who was a senior adviser to Powell for his first six years as Fed chair. At the congressional hearings this summer, Powell sidestepped a question about political pressure and said he was focused on keeping the economy in good shape with inflation under control. 'I want to turn it over to my successor in that condition," he said. 'That's the only thing I think about." Beyond partisan political pressures, the economic challenge alone would test any Fed chair. The Fed's tool—raising or lowering interest rates—is a blunt instrument for a complex $30 trillion economy: push rates too high and risk recession, lower rates too much and risk higher inflation. Powell must steer through an economy facing the uncertainties of Trump's trade policy and the impact of artificial intelligence. The still unknown fallout from tariffs and AI will shape how businesses hire and set prices. And the Fed's decisions will affect whether Americans can afford a home or see their paychecks keep up with costs. Inflation has been above the Fed's 2% target for four years. Officials worry tariffs will encourage businesses to raise prices and keep inflation elevated. Economic policymakers also worry about the health of the U.S. labor market, which can take years to return to normal after recessions. Postpandemic employment trends have been hard to read. Recent swings in business formation and immigration can make estimates of labor demand difficult to pin down. Monitors at the New York Stock Exchange showing Fed Chair Jerome Powell speak on July 30. 'They're in a no-win situation because they're going to be late on employment no matter what, given the downward revisions we've already seen," said Diane Swonk, chief economist at KPMG. 'And inflation is likely to look worse before it looks better." Recent economic data shows the challenge. After declining gradually last year, a gauge of underlying inflation fell to a low of 2.6% this year and is now creeping toward 3%. Payroll growth slowed sharply over the three months that ended in July with significant downward revisions to May and June figures. Even so, the unemployment rate has held close to 4.2%. The hiring slowdown coincides with Trump administration policy shifts that include immigration crackdowns, tariffs, federal job cuts and reduced spending on government contractors and nonprofits. The Trump administration says its tax cuts and deregulation might offset some of those headwinds. A majority of Fed officials supported holding rates steady last month, though two Fed governors, Christopher Waller and Michelle Bowman, dissented in favor of a rate cut. Waller and Bowman are Trump appointees who are under consideration to become Fed chair when Powell's term ends in May. Waller warned that job growth is weaker than it looks, with some indicators 'flashing red." He has argued that officials shouldn't decide rates based on tariff-related price increases, saying those aren't likely to be repeated. In a swipe at Powell, Bowman said Fed decisions haven't been consistent. She pointed out that housing, consumer spending and the share of working-age people with jobs were weaker now than last year, when the Fed began to cut rates. On the other side of the rate-cut debate are the inflation hawks. Kansas City Fed President Jeff Schmid, a voting member of the rate-setting committee this year, argued in a speech last week that the effect of tariffs on inflation had been limited, in part, because the Fed hadn't eased rates prematurely. He said he expected the uncertainty of its impact on prices would last months. Powell's job is to forge consensus from these competing views and, when needed, guide it in his preferred direction. The path there may be emerging from the economic data itself. The July jobs report provided clearer evidence of labor market softness—potentially giving Powell rationale for a rate cut next month. The labor market 'is not bad right now," San Francisco Fed President Mary Daly said. 'But you know that the direction of change is going the wrong way." She also said tariffs aren't passing through to higher prices as much as some forecasters feared, reducing the risk of a big shock. Minneapolis Fed President Neel Kashkari said the Fed might have to cut rates now to support the labor market and leave open the prospect of reversing those moves if inflation resurges. 'I don't love that path," he said, 'but that might be the best of a limited set of options." Others are undecided. St. Louis Fed President Alberto Musalem and Chicago Fed President Austan Goolsbee flagged an unexpected rise last month in prices for services, which would suggest holding rates steady. Yet Musalem also pointed to slower economic growth, which could favor a future rate cut. Trump's challenge is that Fed independence runs deeper than any single leader. Even if Powell is replaced by someone more sympathetic to the White House next spring, there may still be officials worried about inflation and impervious to political pressure. Powell has served as a shield for some colleagues. His relationships with Fed peers are likely 'stronger than ever because the committee knows the tough spot that both the chair and the institution are in," Faust said. Some see less danger in the blustery attacks by Trump on Powell than the possibility of a White House campaign to weaken the Fed structure, including the 12 reserve banks. Meetings to set interest rates are attended by the 12 bank presidents and a seven-member board of governors, though only five presidents at a time have a vote on policy decisions. Unlike Fed governors, who are nominated by the president, regional bank presidents are chosen by their local boards and have traditionally operated independent of Washington. The Fed presidents serve five-year terms at a time, and the terms run concurrently. The 12 presidents must be reappointed by the governors to new five-year terms before next March. A Fed board could remove a regional bank president by majority vote, but it never has done so. Fed Chair Jerome Powell arriving for a Federal Reserve Board meeting last month in Washington. Since the governors are appointed by the president, there are nervous conversations about the possibility of the White House seating a future board dominated by Trump appointees, who would threaten to block reappointments of Fed presidents before March or remove them after they are reappointed. A Trump administration official alleged Wednesday that Cook, a Fed governor appointed by Biden, might have committed mortgage fraud by applying for loans on two properties she each identified as her primary residence. Trump selected one of his economic advisers to fill the seat of a Fed governor who resigned unexpectedly this month. If another governor leaves early, the president could install an ally and give his appointees a majority on the board. A final source of pressure on the Fed came last week from Treasury Secretary Scott Bessent, a former hedge-fund investor with keen knowledge of monetary policy who is overseeing the search for the next Fed chair. Bessent, who had pledged not to comment on rates, said in a TV interview that the Fed should consider a larger half-percentage-point rate cut in September and, after that, to continue to lower its benchmark rate, currently around 4.3%, to less than 3%. Some investors subsequently dialed up expectations for a half-point cut. Bessent did more than just voice an opinion. He appeared to put Powell in a corner. If investors buy or sell assets because the Treasury secretary's comments lead them to believe a sizable rate cut has become more likely, Powell risks disappointing markets and taking the blame for any selloff if the Fed doesn't follow through. When Bessent was asked about his comments during an interview the following day, he said, 'I didn't tell the Fed what to do." Write to Nick Timiraos at
Mint
2 minutes ago
- Mint
Australian shares hit fresh high on mining and banks boost
Aug 21 (Reuters) - Australian shares rose to a record high on Thursday, driven by miners and banks, while investors awaited U.S. Federal Reserve Chair Jerome Powell's speech at the Jackson Hole symposium on Friday to gauge the interest rate trajectory. The S&P/ASX 200 index was up 0.6% at 8,966.80, as of 0043 GMT, after touching a fresh high of 8,973.70 earlier in the session. The benchmark has gained 2.6% so far this month, hitting multiple record highs as risk sentiment improved due to a slew of factors including an interest rate cut and positive corporate earnings. Investors around the globe are focussed on whether Powell will push back against market expectations for a rate cut next month when he speaks at the Fed's Jackson Hole symposium on Friday, following a weak jobs report for July. Traders are currently pricing in around an 82% chance of a 25-basis-point rate cut in September, according to the CME Fedwatch tool. Back in Australia, investors focussed on corporate earnings. Australia-listed shares of James Hardie deepened their rout from Wednesday, falling as much as 9.6% to A$28.92, their lowest level since January 20, 2023. The fibre cement maker on Wednesday flagged a bleak outlook for fiscal 2026 and forecast earnings below street view. Whitehaven Coal fell as much as 4.2% to a one-month low of A$6.160, as the coal miner's annual profit declined by more than half. Miners rose 1%, with BHP and Rio Tinto up 0.1% and 0.9%, respectively. Financials climbed 0.3%, with the "big four" banks rising between 0.1% and 0.7%. New Zealand's benchmark S&P/NZX 50 index rose 0.4% to 13,126.80. The Reserve Bank of New Zealand said the effect of interest rate cuts on the local economy had been slower than expected, with tariff threats impacting business and consumer confidence. (Reporting by Shivangi Lahiri in Bengaluru; Editing by Subhranshu Sahu)
Time of India
32 minutes ago
- Time of India
Breaking News Live Updates: Fed's Lisa Cook says 'no intention of being bullied to step down' after Trump's pressure
21 Aug 2025 | 06:25:47 AM IST Federal Reserve Governor Lisa Cook said on Wednesday she had "no intention of being bullied to step down" from her role at the central bank, amid calls from U.S. President Donald Trump to do so, according to a statement a Fox Business reporter shared on X. President Donald Trump ramped up pressure on the US central bank Wednesday with a call for Federal Reserve Governor Lisa Cook to step down, as he repeatedly criticizes Fed Chair Jerome Powell for not lowering interest rates."Cook must resign, now!!!" Trump wrote on his Truth Social platform, sharing a Bloomberg news report on how the Federal Housing Finance Agency's director has called for greater scrutiny of Cook over a pair of director Bill Pulte -- a staunch ally of Trump -- had reportedly written a letter to the US attorney general calling for an investigation of Cook while suggesting that she might have committed a criminal said she had learned about it in a post on social media, and that the mortgage application took place "before I joined the Federal Reserve.""I have no intention of being bullied to step down from my position because of some questions raised in a tweet," she said in a statement to she said she would take questions about her financial history "seriously" and was "gathering the accurate information to answer any legitimate questions and provide the facts."The Trump administration has pursued allegations of mortgage fraud against high-profile Democrats who are seen as political adversaries of the was not immediately clear if such a probe will take place targeting Cook, the first Black woman to serve on the central bank's president is also limited in his ability to remove officials from the central bank.A Supreme Court order recently suggested that Fed officials cannot be taken out of their jobs over policy disagreements, meaning they have to be removed for "cause," which could be interpreted to mean wrongdoing. Show more
