Waller's "no" creates a "6 to 5" split! The key to whether the Federal Reserve will raise rates in September could be: Powell?

Author: Long Yue

Less than two weeks remain before the Federal Reserve's September 16 FOMC meeting. The voting situation is extremely tight, and Powell's silence is becoming the market's biggest uncertainty.

Jim Bianco, founder of Bianco Research, posted on social media that, aside from the macro data tug-of-war, the voting process is turning into a key factor affecting the Federal Reserve's current policy direction. He wrote:

I have always believed that watching the Federal Reserve right now is essentially about counting the votes.

With Fed Governor Waller recently leaning toward keeping rates unchanged, Bianco summed up the current vote count as: 6 votes (hold) versus 5 votes (hike), with one vote still uncertain—that of former Chair Powell (his term as Federal Reserve Chair ended on May 15 this year, but he continues to serve as a Fed Governor).

Bianco's personal vote tally

Powell: Deliberately Low-Key, Now the Key Variable

Bianco pointed out that Powell has not spoken publicly since the May press conference: “He wants to fade from the public eye.”

Bianco believes this strategy has a background: Trump's continuous criticism of the Federal Reserve has raised concerns within the committee about its independence, leading FOMC voting members to more explicitly express their positions publicly.

However, Powell's silence now has instead created uncertainty. Bianco wrote:

If everyone votes as they publicly declare, Powell's vote becomes crucial.

Probability of Rate Hike: Actually 50/50

Bianco's conclusion is straightforward and clear:

This is why, with less than two weeks before the meeting, the probability of a rate hike is actually already 50/50.

On August 30, he previously predicted that the voting result for September 16 would be 7 to 5, but the direction was still uncertain—"I'm just not sure if it'll be 7 to 5 for a hike, or 7 to 5 for holding steady."

Currently, with Waller now siding with the hold camp, the hold votes lead 6 to 5 for now, but Powell’s vote could still break the tie, making the final outcome uncertain.

Bianco believes that Trump’s continued pressure on the Federal Reserve is an important backdrop to understanding the current split in votes.

He stated that, due to independence concerns, FOMC members have begun favoring public statements to clarify their positions, rather than relying on internal consultations to form consensus. This makes it possible for outsiders to track policy direction relatively transparently by “tallying the votes.”

Since 1936, there has never been a 6–6 voting result. The closest was in 1963, 1964, and 1973 with a 6–5 vote. The US Federal Reserve Act does not stipulate what to do in the event of a tie. He wrote:

Presumably, this means maintaining the status quo, since no agreement is reached, and the Federal Reserve would continue to keep the federal funds rate steady. Of course, they can agree to a second (or third) vote until the tie is broken.