The typically consensus-driven Federal Reserve is looking more and more divided lately, so much so that next month\u2019s rate-setting meeting could produce a deadlock, according to Capital Economics.<\/p>\n
After two earlier cuts, recent comments from policymakers have been leaning hawkish as inflation remains stuck above the Fed\u2019s target, dampening hopes for more easing at the Federal Open Market Committee\u2019s Dec. 9-10 meeting.<\/p>\n
But New York Fed President John Williams surprised Wall Street on Friday when he said he sees \u201croom for a further adjustment in the near term\u201d to bring benchmark rates closer to neutral. <\/p>\n
That boosted odds for rate cut next month above 70%<\/a> from less than 40% the day before, while also sparking a broad stock market rally. But it also potentially sets up some tricky math on the 12-member FOMC.<\/p>\n In a note on Friday, economists at Capital Economics attempted to count votes. The four regional Fed bank presidents on the committee\u2014Susan Collins, Austan Goolsbee, Alberto Musalem and Jeffrey Schmid\u2014have sounded skeptical or \u201cdownright hostile\u201d to the idea of a rate cut next month. Fed governors Michael Barr and Phillip Jefferson have also signaled caution.<\/p>\n On the dovish side, the three Trump-appointed Fed governors\u2014Michelle Bowman, Stephen Miran and Christopher Waller\u2014have been calling for rate cuts, and Williams sounded Friday like he could join them.<\/p>\n \u201cThat\u2019s still only four ayes in favor of a cut and six nays against but, to the extent that Williams and Fed Chair Jerome Powell often hold the same view (and Governor Lisa Cook usually votes with Powell), we could have a six-six tie,\u201d Capital Economics said. <\/p>\n \u201cThen things would get really messy since it\u2019s not clear that Powell has a casting vote, so the vote to change policy might simply fail to be carried.\u201d<\/p>\n The Labor Department\u2019s September jobs report released on Thursday after being delayed by the government shutdown is unlikely to tip the scales.<\/p>\n That\u2019s because the mixed data showed payrolls grew by more than expected, but prior months were revised lower with August now showing a decline. The unemployment rate also ticked up to 4.4%, the highest since 2021, from 4.3%.<\/p>\n Separate data on weekly jobless claims still don\u2019t indicate a spike in newly unemployed people, but the steady rise of continuing claims means jobs are difficult to find.<\/p>\n What if there\u2019s a tie vote on the Fed?<\/p>\n There has never been a tie vote at the Fed, and the\u00a0FOMC\u2019s rules and procedures<\/a>\u00a0don\u2019t discuss such a scenario.<\/p>\n