Fed's Waller, Bowman Support Rate Cut, Boost Market Confidence

In a move that has significant implications for the market, the Federal Reserve's latest interest rate cut was accompanied by a notable detail: the supportive votes from two key officials, Waller and Bowman. The Federal Open Market Committee (FOMC) decided to lower interest rates by 25 basis points, a decision that was broadly interpreted as slightly "hawkish" by the market. However, the voting results revealed more than just the rate cut itself.

In this meeting, only the newly appointed member Stephen Miran voted against the decision, advocating for a 50 basis point cut. Notably, Waller and Bowman, who had previously expressed dissent, voted in favor this time. This decision sent a strong signal about the Fed's commitment to maintaining its independence. Waller and Bowman, both seen as potential candidates for the next Fed chair, chose not to vote against the decision, despite the political advantages they could have gained by supporting a more aggressive rate cut.

This decision had immediate repercussions in the market, particularly in the betting odds for the next Fed chair. Waller's odds for the position significantly decreased, while Miran's odds surged to the top. This shift suggests that the market interpreted Waller and Bowman's votes as being based on their economic judgments rather than political considerations. Their actions indicate that the rationale for a more aggressive rate cut from the current levels is weaker than what the government might want the public to believe.

The significance of Waller and Bowman's supportive votes extends beyond the immediate context of the Fed chairmanship. Their decision not to dissent is seen as a positive signal, reducing the risk of future monetary policy being overly influenced by political factors. This move suggests that they are unlikely to act as "compliant political puppets" in the future. For investors, this means that concerns about the "White House taking over the Fed" may be overstated.