The funniest possible outcome of the December Fed meeting

1 day ago7 min read5 comments

The Federal Reserve stands at a critical juncture, deeply fractured between officials advocating for an interest rate cut next month and those staunchly opposing such a move, with one particularly plausible voting outcome poised to create a stunning irony. As a dedicated follower of Wall Street and macro-economic policy, the current schism within the FOMC is not merely a footnote but a central drama that could define market trajectories for the coming quarter.Typically, the Federal Open Market Committee operates under a veil of consensus, with dissents being rare and largely symbolic; however, these are not normal times. The profound policy divides, laid bare in recent minutes, elevate the vote count from a procedural detail to the main event.Consider the wild yet fully plausible scenario unfolding: if the leadership triumvirate of Chair Jerome Powell, Vice-Chair Philip Jefferson, and New York Fed President John Williams decide a rate cut is warranted, they would likely be joined by the three Trump-appointed governors on the committee—Michelle Bowman, Stephen Miran, and Christopher Waller. That coalition, however, only musters six votes of the twelve voting members, leaving them one shy of a majority.The search for that elusive seventh vote is where the plot thickens. All four voting reserve bank presidents from outside New York—Chicago's Austan Goolsbee, Boston's Susan Collins, St.Louis' Alberto Musalem, and Kansas City's Jeff Schmid—have publicly expressed reservations about easing policy, with Goolsbee notably noncommittal in recent remarks. Should they hold firm, Powell's recourse turns to the Biden-appointed governors.One, Michael Barr, appears awfully worried about persistent inflation and has advocated for caution, making him a plausible 'no' vote and further shattering the longstanding norm against gubernatorial dissents. This leaves the final Biden-appointed governor, Lisa Cook, a labor market-focused official who has kept her policy views closely guarded, as the potential swing vote.The supreme irony? The Supreme Court is scheduled to hear the case on whether President Trump can fire her on January 21st, meaning Governor Cook could cast the decisive vote to cut rates just weeks before her own job security is adjudicated by the highest court in the land. This situation is reminiscent of historical Fed inflection points, like the fraught deliberations under Volcker or the tense meetings during the 2013 taper tantrum, where internal discord presaged significant market volatility.The consequences of such a narrowly passed decision would be profound, potentially undermining the perceived unanimity of the Fed's forward guidance and injecting uncertainty into bond and equity markets that thrive on predictability. Analysts would immediately parse the dissents for clues on the durability of the policy path, and the institutional credibility of the Fed could be tested at a time when global economic headwinds from Europe and China demand steadfast leadership. The very fact that a single vote could hinge on an official under direct political threat underscores the fragile intersection of monetary policy and political pressure, a dynamic that central bankers have historically sought to insulate themselves from, with varying degrees of success.

#Federal Reserve

#interest rates

#FOMC

#vote count

#Jerome Powell

#Lisa Cook

#central banks

#featured

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