The rate decision is almost certainly going to see the Fed cut by 25 bps. However, the voting intention is going to be a focus as there might be a handful of dissenters - more so on the dovish side. So, let's take a look at how things might play out and how markets might take to such a scenario.
The most dovish members on the board are made rather clear now. Trump nominee Miran is going to spearhead calls for a 50 bps rate cut and he won't be shy about it. That being said, he might only be joined by the likes of Bowman and Waller this time around in trying to push for a more aggressive dovish move.
So if we do get those three being in the dissenting camp in calling for a 50 bps rate cut, it shouldn't come as too much of a surprise. The real dovish push for the dollar and one that will keep markets interested will be any more additions to the list other than the three above.
In that lieu, we could see Boston Fed president Collins also join the 50 bps camp. Personally, I wouldn't think so but she has previously emphasised on focusing on labour market conditions back in August while already sort of backing a 25 bps rate cut. She did try to hold her tongue in saying that September is "not a done deal" and that there is still "a range of possibilities on the table" but those were comments from four weeks ago.
Besides that, we should see Powell, Barr, Jefferson, and Cook hold the line in reaffirming a 25 bps rate cut later today. And they should be joined by Williams, Goolsbee, and Musalem at the very least.
The one standout would be Kansas City Fed president Schmid, who previously said in August that "“retaining a modestly restrictive monetary policy stance remains appropriate for the time being". Adding that inflation is a bigger risk to the Fed mandate at the time than on the labour market side. Of course, a lot has happened since then.
So, will there also be a dissent to keep rates on hold? If there would be one, it will be Schmid.
The mix and balance of the dissents and votes are going to be heavily scrutinised by markets in deciding what is more dovish and what is more hawkish. But even so, that has to be taken together with Fed chair Powell's communique in deciphering what the Fed might do next in October and/or December.
But if Miran, Bowman, and Waller are joined by any other voting members today in siding with a 50 bps move, expect that to quickly translate to a more dovish balance at the Fed in chasing potentially bigger rate cuts by year-end; that is if US labour market data continues to deteriorate in the months ahead.
Besides the dissents, the other key thing to watch out for will be the dot plots.
Right off the bat, Miran's inclusion will definitely skew the latest projection today to be more dovish surely. So, there's that to take into account.
The 2025 median during the June projection was 3.9%, with 9 members seeing rates above 4% and just 2 members anticipating at least two rate cuts for this year. The script there is likely to be flipped now with possibly 9-10 members anticipating at least two rate cuts for this year.
The key thing to watch here will be how many actually see just one rate for the year and how many projecting two or more rate cuts by year-end. The skew in this balance is what is going to be the focus of market players in further deciding a more dovish or hawkish takeaway from the Fed today.
As for 2026 and 2027 projections, they are expected to tone down further amid a more dovish tilt by the Fed in the past few weeks. The median projections back in June were at 3.6% and 3.4% respectively. I wouldn't be surprised if we got something closer to 3% for 2027 this time around.
