LATIN AMERICA: Credit Market Wrap

As far as the 7 non-voting FOMC participants, we detect a similar proportional split: 2 likely for a cut; 3 that could go either way, and 2 likely leaning against.

• The one non-voter that looks sure to support a September cut based on post-July commentary is San Francisco’s Daly.
• In a similar vein, Minneapolis’s Kashkari has suggested that two cuts by year-end including September is a base case.
• Those that suggested they could be persuaded to cut if there is continued weakness in labor market data – but not currently a base case - include Atlanta’s Bostic and Cleveland’s Hammack.
• Philadelphia’s Paulson has just joined the FOMC and hasn’t yet commented on monetary policy but for now we consider her open to the idea of a cut.
• On the more skeptical end: Richmond’s Barkin hasn’t suggested any real preference to cut in September and sounds patient to wait for further data/information.
• And Dallas’s Logan hasn’t commented since the July meeting but we think she would not be easy to convince that a September cut is appropriate. 

The first two members in the “September cut” column on the FOMC  are permanent voters Bowman and Waller, who said that they voted against the central bank's "wait and see" rate policy in July  because upside risks to price stability have diminished and it was time to proactively hedge against further weakening in the economy and the risk of damage to the labor market. Bowman said this month she’d support 3 rate cuts through year-end (ie at each remaining meeting).

• It’s arguable that Gov Cook sounded increasingly minded to a September cut when she commented after the August payrolls report that the labor market could be at an “inflection point” – but she didn’t outright endorse one. And the other permanent voters – Powell, Barr, Williams, and Jefferson – haven’t commented since the July meeting (or August payrolls report). We would expect the Board members (ex-Bowman/Waller) to vote more or less as a bloc.
• Among the 4 regional Fed voters in 2025, the 3 who have commented on monetary policy since the July rate hold have not explicitly ruled out support for a September cut, but nor have they endorsed one.
• Chicago Fed Pres Goolsbee said that while FOMC meetings in the fall are "going to be live", he didn’t offer much in the way of overt support for a rate cut in September. Indeed he says he's "uneasy" about the idea that tariffs have only a one-off impact on prices, and that "the hardest thing that a central bank ever has to do is try to get the timing right when there are moments of transition."
• Kansas City’s Schmid hinted that he wouldn't support a rate cut as soon as September, and could even dissent against such a decision. “retaining a modestly restrictive monetary policy stance remains appropriate for the time being …First, while monetary policy might currently be restrictive, it is not very restrictive. And second, given recent price pressures, a modestly restrictive stance is exactly where we want to be.”
• St Louis’s Musalem sounded worried about deviations from both the employment and price stability mandates, so “for me, it’s too early to say exactly what policy I will be able to support.”
• Boston’s Collins hasn’t spoken since the July meeting, but signalled last month that her view at that time was that one rate cut by year-end would likely be appropriate, putting her on the relatively hawkish end of the FOMC spectrum.

So among voters, that suggests about 2 will definitely support a cut (Bowman, Waller), 2 are probably opposed (Schmid, Musalem), and the remaining 7 (Goolsbee, Cook, Powell, Barr, Williams, Jefferson, Collins) may not yet be convinced.

• Here we exclude CEA chairman Stephen Miran, who has been nominated to Kugler’s board seat and who plausibly could be in place by the September meeting – per Politico: “‘The White House has been aggressively pushing Dr. Miran’s nomination to the Federal Reserve Board, setting the stage for his quick confirmation when the Senate returns in September,’ said a White House official”. If he’s in place by the meeting, that’s a clear addition to the cut column.

Ahead of the Jackson Hole Symposium this weekend, we've published our digest of relevant Fed commentary since the last meeting in July - PDF here. 

• Our latest update includes an update of MNI's Hawk-Dove Spectrum - see below.
• Of the 18 current FOMC participants, there appears to be a nearly even split between those who at this point would likely support a rate cut in September, and those who would not. Most members may have to "wait and see" what the data holds between now and then before deciding.
• In our assessment of 18 FOMC members (down from the usual 19 due to Gov Kugler’s surprise resignation this month) we see currently 4 in favor of a September cut (2 of which are voters), 10 that could be persuaded to do so (7 of which are voters), and 4 who are likely opposed as it stands (2 of which are voters).
• Recall that the June meeting's Dot Plot showed a split between participants eyeing either zero or two cuts by year-end.
• We don't our current assessment as inconsistent with the July meeting minutes released subsequent to the publication of our Jackson Hole preview, which showed a majority "judged the upside risks to inflation" as greater than that to employment, with "several" seeing the risks as "roughly balanced" and a "couple" seeing employment risks as prevalent.
• In short, the July employment report (out after the meeting) likely shifted some more into the "several" seeing risks as "roughly balanced", while in any event the majority of the Committee is likely to be swayed at the September meeting by Chair Powell's viewpoint at that time - there are no signs he has made up his mind yet (our Jackson Hole preview suggests he may not clearly signal a September cut in his speech).