Allies of Jerome Powell prepare him to advocate for a rate cut

A divided committee, missing data and a whiff of stagflation leave Powell to choose between two paths—each with drawbacks

In October, the Fed cut rates for the second time this year. Chair Jerome Powell said a third cut is ‘not a foregone conclusion.’ WSJ’s Nick Timiraos explained the central bank’s split outlook. Photo: Noah Higgins-Dunn

Allies of Federal Reserve Chair

Jerome Powell have laid the groundwork for him to push a rate cut through a divided committee at next month’s meeting even though it could draw multiple dissents.

The unusual level of division inside the Fed means that, to an even greater degree than usual, the final call rests with Powell.

To negotiate these stark divisions, Powell is likely to weigh two approaches, each with drawbacks. The first: cut rates, as markets now expect, and use the exquisitely negotiated postmeeting statement to signal a higher bar for further reductions. This “cut then hold” approach would mirror what Powell did in late 2019 when, like now, three cuts met meaningful resistance from his colleagues.

This option would also likely trigger objections from officials who don’t support any cut. But it could end the soap opera of officials airing their disagreements in public by stitching together a new consensus that further cuts aren’t warranted if recent conditions persist.