A slight surprise and a touch of dissent

Federal Reserve Chairs traditionally distain dissents to the monetary policy decisions made by the Federal Open Market Committee (FOMC). Fed Chair Powell doesn’t seem to hold the iron hand as Paul Volcker and Alan Greenspan. At least he didn’t come off that way at the meeting last week when asked about Governor Michelle Bowman’s preference for a quarter-point reduction—the first dissent by a governor since 2005—when discussing the 50 basis-point cut. “There is a lot of common ground,” he said.

Even though the decision to start the easing cycle was not unanimous, and a slight surprise as the markets were still expecting a quarter-percentage-point ease, the focus now shifts to how many cuts will come. The magnitude will also be crucial.

The Summary of Economic Projections showed that policymakers expect fed funds to fall from the new range of 4.75%-5% to a median point of 4.375% by year-end 2024, 3.375% by the end of 2025 and 2.9% in the long run. As usual, those moves are hypothetical and will be dependent on the data. The upcoming FOMC meetings will be more interesting the rest of this year than they have been.