Hawkish Presser - For Legacy and Fed Independence
Standing firm & raising the bar on cuts doesn't prevent a "hawkish" Sep Cut
Summary
- As expected, the FOMC left rates unchanged at 4.25-4.50%.
- Waller and Bowman dissented, as we expected, marking the first time two voters dissented at the same meeting in over 30 years.
- In contrast to the dissents, and likely to support the perception that the Fed operates independent of political pressure, Chair Powell adopted a more firm and hawkish tone in the press conference.
- Given tariff risks to inflation and uncertainty-related risks to growth, the window for back-to-back cuts over the summer has closed. Our base case is still for the Fed to cut rates at the September meeting.
