Powell “ holds the ” key from the next Fed rate movement, because divided decision -makers will probably not manage to reach a consensus, says Jpmorgan

On Friday, in his speech by Jackson Hole, President Jerome Powell opened the door to a drop in rate at the central bank meeting in September after months of maintaining a more bellicist position, attaching a furious rally to Wall Street.

Its emphasis on the growing risks for the labor market coupled with a more silent warning on the inflationary impact of the prices marked a change in its tone. But everyone in the Federal Open Market Committee did not seem dominant, including the president of Kansas City Fed, Jeffrey Schmid.

This sets up another FOMC meeting with dissident votes, after two political decision -makers voted to reduce the rates the last time, going against the majority which maintained stable rates.

While Powell counts as a vote on the FOMC, he has an oversized influence as president and could prove to be decisive in another fractional vote.

“The advice of a range of federal speakers were mixed this week, while the minutes of July learned a modest healing tone,” JPMorgan economists wrote by Bruce Kasman on Friday. “A consensus decision in September seems unlikely, and it is President Powell who holds the key to the result of the meeting.”

Another contested meeting would mark the gap more compared to the traditional decision -making process of the traditional Fed consensus, which generally results in unanimous votes.

But future meetings could see the division continuous, the Hawks indicate that inflation still extends above the 2% objective of the Fed and other economic data signaling resilience. Indeed, the composition of the Fed is in flow, potentially leading to more push and traction among political decision -makers.

Stephen Miran, who has already exploded the Fed consensus approach, should join the Governors’ Council and add to the dominant votes. Meanwhile, Powell’s mandate as president expires in May, and President Donald Trump threatened to dismiss Governor Lisa Cook if she does not resign.

Perspectives for the FED rate reduction cycle

And even if the Fed decreases the rates next month, the pace of future cuts is not clear, which gives more fodder for the debate on the Central Bank while the officials appointed by Trump push to a dominant policy.

Some Wall Street analysts do not see an aggressive softening cycle on the horizon, and Powell said that any rate drops would occur in a cautious manner.

“This message may not be greeted by an administration looking for an immediate aggressive relaxation,” said JPMorgan.

The chief economist of the capital economics markets, John Higgins, said in a note on Friday that Powell “had poured three cups of cold water” in the hope of a major relaxation of the Fed policy.

They include indications that the current rate is only modestly restrictive, that the neutral level can be higher than in the 2010s, and that a revised policy framework would amount to a more symmetrical approach to rising and downwards inflation risks.

Similarly, Ryan Sweet, chief economist of the United States at Oxford Economics, said that a drop in rate in September would amount to an “insurance” decision because Powell had previously promised not to be late on the labor market signals.

In fact, its position moves away from others to the Fed while it emphasizes more on the side of the use of the double mandate while the prices should cause a short -term inflation bump.

“Powell seems to prepare the ground, assuming that the economy occurs as it expects it to expect and the risks do not change significantly, for a progressive approach to normalize interest rates,” said Sweet in a note. “In other words, one cut to all the other remaining meetings this year.”