Following a more hawkish stance over recent months, Fed Chair Jerome Powell's remarks at last Friday's Jackson Hole Global Central Banking Conference opened the door for September rate cuts and triggered a strong market rally. While Wall Street broadly expects the Federal Reserve to cut rates next month, this doesn't guarantee internal Fed consensus, as disagreements persist among policymakers. Not all Federal Open Market Committee (FOMC) members are equally dovish, with Kansas City Fed President Jeffery Schmid taking a different stance, for example. JPMorgan suggests not to expect policymaker unanimity, with Powell potentially serving as the decisive factor.

JPMorgan economists led by Bruce Kasman stated in a report last Friday: "This week's varied statements from multiple Fed officials, combined with the somewhat hawkish July meeting minutes, suggest consensus in September is unlikely, with Powell being the key figure determining the meeting's outcome." The economists noted that while Powell has only one vote on the FOMC, his influence as Chair extends far beyond that of regular members, potentially playing a decisive role in split votes.

In the last policy meeting, Fed Governors Waller and Bowman voted for rate cuts, diverging from the majority who voted to maintain rates unchanged. Another divided meeting would signal the Fed's further departure from its traditional consensus-driven decision-making approach, which typically produces unanimous voting outcomes. Future meetings may continue to see divisions, as hawks will emphasize that inflation remains above the Fed's 2% target while other economic data shows resilience.

Additionally, the Fed's internal composition is undergoing changes, potentially leading to more tug-of-war among policymakers. Stephen Miran, who previously criticized the Fed's consensus mechanism, is set to join the Board of Governors and may increase dovish votes. Meanwhile, Powell's chairmanship expires in May next year. President Trump has threatened to fire Governor Lisa Cook if she doesn't resign.

Even if the Fed cuts rates next month, the future pace of cuts remains unclear, providing more room for internal Fed debate, especially with Trump-appointed officials pushing for more dovish policies. Some Wall Street analysts don't anticipate an aggressive easing cycle, while Powell has indicated any rate cuts would be conducted cautiously. JPMorgan noted: "This message may not be welcomed by a Trump administration seeking immediate substantial easing."

Capital Economics Chief Market Economist John Higgins said Powell "poured cold water on expectations for significant policy easing" in three ways: current rate levels are only moderately restrictive; the neutral rate may be higher than 2010s levels; and the revised policy framework will return to more symmetric treatment of upside and downside inflation risks.

Oxford Economics Chief US Economist Ryan Sweet also indicated that September's rate cut would be more of an "insurance" measure, as Powell previously promised not to wait for labor market signals before acting. Sweet stated: "Powell seems to be paving the way for a gradual rate normalization approach, assuming the economy performs as he expects and risks don't change significantly. In other words, cutting rates every other meeting for the remainder of this year."