Fed Holds Steady, But the Cracks Are Showing

Michelle Bowman and Christopher Waller dissented, calling for a 25 basis point rate cut, marking the first time since 1993 that two Fed governors openly opposed the majority. In Fed-speak, that’s like a knife fight at a dinner party.

Powell is now navigating a classic political-economic standoff. With economic growth showing signs of fatigue and President Trump’s re-election campaign ramping up the pressure for looser monetary policy, Powell is standing in the way like a human sandbag. But even he can’t ignore the rumblings from inside the house.

“Although swings in net exports continue to affect the data, recent indicators suggest that growth of economic activity moderated in the first half of the year,” said the Fed statement. Translated from Fedspeak: things are slowing, but we’re pretending it’s fine.

Inflation remains elevated (whatever that means in this post-COVID, post-QE, post-everything era), the labor market is “solid” (another data-warped word), and Powell continues to signal “higher for longer” despite mounting political headwinds.

Yet two key signals flashed yellow:

1. Dissent within the Fed is no small thing. It erodes the illusion of policy omniscience and consensus.

2. Markets didn’t like it. Bitcoin dipped nearly 2% to $116,000. The S&P 500 and Nasdaq both faded from earlier gains. Not panic, but not good.
   

Bitcoin dumped to  $116,000 before recovering slightly, source: BNC Bitcoin Liquid Index

All eyes now shift to Powell’s press conference, where his every sigh, pause, and coded phrase will be dissected by algorithms, journalists, and memelords alike.

Is a September rate cut coming? The CME FedWatch tool gives it a ~60% chance, and Powell’s resolve is already being tested by both the bond market and the White House.

In the end, Powell may be holding firm, but the Fed’s fortress just showed its first cracks. Rate cuts will come, it is just a matter of time. If you don’t already own Bitcoin, it’s generally good to buy Bitcoin before rate cuts are announced. Something to think about for those wondering if now is a good time to buy crypto.