Analysis: Powell is not the biggest obstacle to rate cuts, the Fed's internal consensus mechanism is on the brink of collapse

BlockBeats News, November 22, "Fed Whispers" Nick Timiraos wrote that President Trump stated this week that he expects a significant rate cut after appointing a new Fed Chair next May. However, internal opposition to a rate cut in December within the Fed is growing, indicating that his wish may be hard to realize.

Whether Powell chooses to stay put or cut rates in December, he faces the most serious internal resistance in his nearly eight-year term. This division may persist into next year, meaning that even with a new Chair, more rate cuts are not guaranteed. Some are concerned that if Trump cannot get his way, he may take more aggressive measures to weaken the Fed's independence in exchange for rate cuts.

For over 30 years, Fed Chairs have sought as broad a consensus as possible on rate decisions, with no decisions being made by a slim majority. However, the December meeting is highly likely to see three or even more dissenting votes.

Economist Krishna Guha of Evercore ISI said we are witnessing a breakdown in the decision-making process, and next year we may see a severely divided committee. The (December) meeting feels like a preview of 2026. This implies an unprecedented scenario: monetary policy outcomes may be determined by a very rare slim majority (instead of the traditional pursuit of broad consensus over the years), and a new Chair appointed by Trump may not always be in control of the situation. (FXStreet)