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BNY’s John Velis reviews the April Federal Open Market Committee (FOMC), highlighting four dissents against the easing bias and implications for future policy under incoming Chair Kevin Warsh. He argues markets overstate the impact of the dissents and maintains a forecast of two Federal Reserve (Fed) rate cuts in Q4, conditional on the Strait of Hormuz reopening and Oil prices easing.
FOMC dissents, Powell tenure, Q4 cuts
“For a meeting that was supposed to be straightforward and relatively predictable, the April FOMC proved considerably more eventful than expected. Chair Jerome Powell may not be riding off into the sunset just yet, but the real story of the meeting was four dissents, the first time in over 30 years. Three of these – from Beth Hammack (Cleveland), Neel Kashkari (Minneapolis), and Lorie Logan (Dallas) – opposed the “inclusion of an easing bias” in the statement language, a signal that incoming Chair Kevin Warsh will get the “messier meetings” that he asked for in his Senate Banking Committee testimony.”
“The dissents suggest the new Chair will likely face at least a few obstacles in fulfilling the President’s stated desire for quick rate cuts. We think this is currently a moot point and the market is overweighting the significance of this development.”
“Current market pricing has indeed shifted in a more hawkish direction, with the December 2026 implied rate showing 8bp of hikes, and March 2027 pricing showing about 17bp.”
“Warsh will only be able to cut rates if he can do the same or if macro conditions shift materially. Those who believe Powell is staying on to block rate cuts misunderstand both him and Committee dynamics.”
“We maintain our outlook of two cuts in Q4 – contingent on the Strait of Hormuz reopening and oil prices beginning to recede, taking inflation fears lower with them. We view the labor market as a key risk.”
