FOMC: How many July dissents? – Standard Chartered

Market expects a dovish hold in July, with Fed Chair Powell hinting at a September cut. Vice Chair Waller and Governor Bowman’s comments in June increase the risk of two dissents. Dissents would raise the possibility of a more divided and perhaps more politicised FOMC in the future. More frequent dissents may also reduce the effectiveness of forward guidance as a tool, Standard Chartered's economist Steve Englander reports.

Fed hawks turn dovish ahead of July FOMC

"We expect dissents from Governors Bowman and Waller at the 30 July FOMC in favour of cutting the fed funds policy rate by 25bps. Waller is explicit in his reasoning: 'We could do this cut policy rates as early as July', arguing that the FOMC should treat tariff-driven price increases as one-off. He doesn’t see a labour market that is strong enough to sustain second-round wage and price increases. Bowman said: 'Should inflation pressures remain contained I would support lowering the policy rate as soon as our next meeting.' Both saw risks of labour market weakening. Their comments are direct enough to imply voting for cuts in July, unless inflation data turns sharply higher."

"Asset markets will likely initially see the two dissents as auguring a more dovish FOMC down the road, but this knee-jerk reaction may be a misread. Waller has moved from dovish to hawkish and back several times depending on how he reads the economy. Any future board nominee has to get through the Senate Finance Committee where Republicans have a one-vote majority. Thom Tillis, a conservative Republican senator on the committee, voted against the fiscal package and will not be running for re-election in 2026. He is unlikely to give a pass to a candidate he considers unqualified."

"Moreover, discussion of a July cut makes sense despite the overlay of politics. Fed Chair Powell in his congressional testimony admitted that the FOMC would be cutting policy rates now were it not for the risk that tariffs would spark persistent inflation. The debate between hawks and doves seems more on the likelihood that inflation persists rather than the reaction to a persistent inflation overshoot."