The Federal Reserve will announce its latest interest rate decision at 2:00 p.m. local time on Wednesday (July 30) (2:00 a.m. Beijing time on Thursday). The rare dissenting votes that may appear during the meeting reflect the continued struggle between the White House and the central bank. At the same time, the differences among officials on the economy and policy paths have made this meeting the focus of the market and full of suspense.



Suspense 1: For the first time in nearly 30 years? Two directors may vote against it

The most eye-catching potential variable is the possible dissenting votes of Federal Reserve Governors Christopher Waller and Michelle Bowman. Both have advocated for a rate cut at this meeting. If they do cast a dissenting vote, it would be the first time since late 1993 that multiple governors have dissented simultaneously, breaking the Fed's long-standing tradition of consensus decision-making.

Waller's stance is particularly crucial. As a leading candidate to succeed Powell as Fed Chair next year, his comments are seen as crucial signals about policy direction. In his recent speech, "The Case for Cutting Rates Now," he explicitly stated: "Inflation is close to target, upside risks are limited, and we should not wait for the labor market to deteriorate before taking action." Bowman similarly believes that easing policy is justified in the current economic environment.

Behind this divergence lies a differing assessment of the economic outlook. Some officials worry that while the Trump administration's tariff policy hasn't yet significantly boosted inflation, it could trigger more persistent price pressures. Waller and Bowman, on the other hand, believe that monetary policy has a lag effect and shouldn't wait until the labor market clearly deteriorates before taking action. Inflation risks are manageable, and cutting interest rates now could provide a head-start on the risk of an economic slowdown.

Suspense 2: The struggle between White House pressure and central bank independence

The meeting was shrouded in the shadow of the White House. Trump has been repeatedly demanding a significant interest rate cut from the Federal Reserve. He has accused the Fed of refusing to ease and has even called for Powell's resignation and threatened to fire him, arguing that a rate cut would lower Treasury financing costs and alleviate the pressure on the housing market from high mortgage rates.

This is the first meeting since Trump's historic visit to the Federal Reserve construction site, which sparked controversy over cost overruns. Central bank officials have already launched an intensive public relations campaign to counter White House criticism, and how Powell responds to the topic at his post-meeting press conference will be key to assessing the central bank's independence.

Bill English, former director of monetary affairs at the Federal Reserve, bluntly stated: "If we loosen the policy at this time, it will inevitably be interpreted as a compromise with the president. For the Federal Reserve, the best option is still to make judgments based on data and clearly explain the logic of the decision." This "avoiding suspicion" mentality may also be one of the reasons why most officials tend to postpone interest rate cuts.

Suspense 3: Ambiguity between economic data and policy paths

Despite a near-full employment labor market, the complexity of economic variables creates uncertainty about the policy path. On the one hand, U.S. Treasuries strengthened ahead of the meeting, with a strong seven-year note auction pushing the 10-year yield down to 4.328%, the lowest since July 3rd, reflecting rising market expectations for easing. On the other hand, rising API crude oil inventories and the unclear impact of tariffs on inflation have led officials to adopt a wait-and-see approach.

Tom Kenny, senior international economist at ANZ Bank, pointed out: "Most officials want to see how tariffs affect inflation first - if inflation expectations are pushed up, price pressures may be more lasting rather than a one-time shock." This cautious mentality makes September a more likely window for interest rate cuts. Barclays Private Bank strategist Julien Lafargue also believes that "there is still strong benchmark support for a September rate cut, but it depends on subsequent data."

Further complicating matters, the meeting did not update the summary of economic forecasts or the "dot plot," leaving investors to rely on the policy statement and Powell's speech for clues. Former Dallas Fed President Robert Kaplan admitted, "The Fed's decision not to cut rates isn't Powell's personal decision, but rather a lack of consensus within the committee. Even with a new chairman, a July rate cut would be difficult; there are 12 votes, and he can't make the decision on his own ."

Suspense 4: Preemptive Gambling of Market Reactions

The market has already entered a state of suspense: the US dollar index has retreated from a multi-month high, and the 10-year Treasury yield is hovering at a monthly low, reflecting market bets that the Federal Reserve may shift toward a dovish stance. OANDA Senior Analyst Kelvin Wong believes that the decline in Treasury yields suggests market expectations of a policy shift. Note: US Treasury yields are inversely correlated with Treasury prices, which in turn are inversely correlated with the interest rate on newly issued Treasury bonds. Therefore, declining Treasury yields suggest that the market believes the Fed is leaning toward a dovish stance.

Whether this expectation will be fulfilled, however, depends on the details of the meeting. If Waller and Bowman indeed vote against the bill, it could exacerbate market concerns about a policy split. If Powell signals during the press conference that there is still room for rate cuts this year, it could reinforce expectations of a September rate cut. Conversely, if he emphasizes that "inflation risks remain a concern," it could dampen expectations of easing.

In summary , this seemingly inactive Fed meeting actually harbors multiple uncertainties. The possibility of a dissenting vote, the tussle between the White House and the central bank, and ambiguous economic data all reinforce expectations of a September Fed rate cut. This helps manage market consensus expectations. Traders can identify trading opportunities through expectation management. For example, short-term unexpected volatility caused by hawkish signals could be a good opportunity for contrarian trading.