Wall Street Has Never Seen a Fed Like This: Dovish "Central Forces" vs. Hawkish "Regional Forces"

As the fog of uncertainty surrounding the U.S. economy thickens, divisions and dissent within the 19-member Federal Reserve Board are deepening, putting Fed Chairman Jerome Powell's widely praised communication skills to the ultimate test...

The Fed's decision to cut interest rates last week was not surprising, but the meeting was historic. The Fed voted 10-2 to cut rates by 25 basis points. These two dissenting votes came from both the "hawkish" camp, which supports tighter monetary policy, and the "dovish" camp, which supports looser monetary policy—an extremely rare scenario. This is only the third such occurrence in the history of Fed policy meetings since 1990.

Stephen Milan, a Fed governor appointed by Trump earlier this year, voted last week in favor of a 50-basis-point rate cut, while Kansas City Fed President Schmid voted to keep rates unchanged.

Behind these two individuals lies a deeper schism within the Fed. In fact, Wall Street may have never seen a Fed like this: the Federal Reserve Board is gradually being occupied by Trump-backed dovish "central forces," while among the regional Feds, hawkish "local forces" are "voicing strong complaints" about consecutive rate cuts that ignore inflation...

Meanwhile, Fed Governors Milan, Waller, and Bowman have all publicly supported last week's rate cut decision and advocated for further easing. Waller and Bowman have been included by U.S. Treasury Secretary Besant on the list of candidates to succeed Powell as the next Fed Chair. Powell's term as Chairman expires in May next year.

In fact, in our August article titled "7 Governors + 12 Regional Fed Presidents! Can Trump Really 'Unify' the Fed?", we speculated about the White House's potential plan to reshape the Fed. Based on the current situation, although the Trump administration failed to oust Governor Cook directly over allegations of falsifying mortgage records, it has at least初步 gained greater influence within the Federal Reserve Board.