Federal Reserve Chair Jerome Powell downplayed the dissenting votes in Wednesday's decision to cut interest rates again, but subtle details from the meeting reveal significant internal divisions at the central bank.
Powell's move to lower rates by 25 basis points not only faced opposition from several voting members but also encountered resistance from regional Fed bank presidents who participated in discussions but lacked voting rights this year.
"This is highly unusual. In my over a decade of involvement with the Fed, I've never seen anything like it," said Patrick Harker, who served as Philadelphia Fed President until retiring in June.
Only two policymakers—Kansas City Fed President Jeff Schmid and Chicago Fed President Austan Goolsbee—opposed the rate cut, favoring instead to hold rates steady. Another dissenter, Governor Stephen Milan, continued advocating for a more aggressive rate reduction. Other objections emerged through alternative channels.
In the Fed's quarterly rate projections released alongside the policy decision, six officials indicated that the benchmark federal funds rate should remain between 3.75% and 4% by the end of 2025—unchanged from pre-cut levels—signaling their opposition to the latest easing.
Given that at least four, if not all, of these six officials lacked voting rights at this meeting, some Fed watchers have labeled their higher 2025 rate projections as "silent dissent."
"If it were me, I'd be among those quietly objecting too," Harker remarked. "I believe cutting rates was a mistake."
Another clue was hidden in the Fed's Wednesday documents. Beyond voting officials, regional Fed bank boards—composed of business leaders—also weigh in.
They submit separate recommendations on short-term rates, which typically move in tandem with the central bank's main benchmark. Historically, these suggestions reflect the leanings of bank presidents. This time, only four of the 12 regional banks called for a rate cut, implying eight may have opposed it.
This voting pattern suggests that resistance to easing is concentrated among regional bank presidents, who generally prefer higher rates than Washington-based Fed governors appointed by the White House and confirmed by the Senate.
At the post-meeting press conference, Powell acknowledged that divisions were inevitable given current economic conditions—with inflation still well above the Fed's 2% target and signs of labor market softening.
"Many participants see risks to both unemployment and inflation rising. What do you do? You only have one tool; you can't do two things at once. It's very challenging," Powell said.
However, with many policymakers willing to signal their stance through "silent" formal dissent, whoever succeeds Powell—including potential top candidates like White House National Economic Council Director Kevin Hassett—could face difficulties steering the Federal Open Market Committee (FOMC).
"Powell has been Fed chair for a long time and commands significant respect within the FOMC," said Calvin Tse, U.S. strategist and economist at BNP Paribas. "Even under his leadership, three members now dissent. It's hard to imagine any new Fed chair securing smoother consensus."
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