Fed in Factional Feud: Rate Cut Timelines Spark Internal Warfare

The Federal Reserve's marble halls are echoing with dissent as policymakers clash over when to pull the trigger on rate cuts. Powell's poker face can't hide the deepening rift.

Hawks vs Doves: The Great Monetary Divide

Inflation data's cooling—but not fast enough for the doves demanding immediate cuts. Hawks cling to 'higher for longer,' betting the farm on a 2026 timeline. Meanwhile, Wall Street traders are placing odds like it's the Kentucky Derby.

The Crypto Angle: Digital Assets Brace for Impact

Bitcoin whales are circling as traditional finance dithers. Every Fed delay pushes more capital into DeFi yield farms—because why wait for central bank crumbs when you can earn 12% APY by Tuesday?

Closing Thought: Maybe they should put the decision on-chain and let DAO voters decide. At least then the incompetence would be transparent.

Fed leadership divided over timeline for rate cuts

The Fed’s July meeting will happen on the 29th and 30th, but futures traders aren’t fully convinced that any change is coming that soon. As of now, the CME FedWatch tool puts the chances of a July rate cut at 23%, with 77% betting on September instead. Bowman’s position, though, shows that the internal debate is far from settled.

Right now, the Fed’s key rate is between 4.25% and 4.5%, and it’s been sitting there since the last FOMC meeting. That meeting ended with a shift in tone. Powell said last week the Fed has room to be patient, because the job market remains strong and recent inflation numbers haven’t moved much. Many companies are still offloading inventory they stocked ahead of tariff deadlines, and people aren’t spending as freely, which has limited pricing pressure.

Donald Trump, now back in the White House, has been publicly urging the Federal Reserve to cut rates sharply. He said they should go down by at least 2 percentage points to reduce borrowing costs as the national debt keeps rising. But neither Bowman nor Waller endorsed any number that aggressive. In fact, Waller flat-out said there’s “no need for such dramatic cuts.”

Bowman also weighed in on Trump’s trade policies. She said, “I think it is likely that the impact of tariffs on inflation may take longer, be more delayed, and have a smaller effect than initially expected, especially because many firms frontloaded their stocks of inventories.”

Daly wants to wait, dot plot shows uncertainty inside Fed

Not everyone on the Fed agrees with Bowman and Waller. Mary Daly, president of the San Francisco Fed, said during CNBC’s Closing Bell that she’s in favor of waiting until more data comes in. “We want to be thoughtful enough to collect the information,” she said.

Daly also pointed out that “unless we saw a faltering in the labor market that was meaningful, and we thought it would be persistent, then I would say the fall looks more appropriate to me.” She won’t vote this year, but her views still highlight how split the Fed is right now.

At the same time, TRUMP has dialed back the aggressive talk on tariffs and is now open to negotiating with trade partners. Economists had warned that these tariffs could spike inflation, but the data have shown very little movement. That shift in tone from Trump has taken some heat off the Fed, giving more flexibility on when and how to act.

The Fed’s DOT plot, which shows where each FOMC member thinks rates are headed, is all over the place. Out of 19 participants, seven want to hold rates steady through 2025. Two expect one cut, while ten see two or three cuts happening. The median projection still points to two cuts this year, but the disagreement shows there’s no single direction everyone agrees on.

Bowman said she supports the new tone from the last post-meeting statement, where the Fed stopped focusing on external uncertainty and instead started looking more at potential weakness in the labor market. That change is important because it shows growing concerns that jobs might take a hit if the Fed stays too tight for too long.

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