Fed Watch – 5/22/2026

The below transcript is a literal translation of the podcast audio that has been machine generated by Adobe Podcast.

I’m Lauren Saidel-Baker, and thanks so much for joining us for this May 22nd edition of Fed Watch. Well, after the inflation bombshells that dropped last week, we do have increasing views into the Fed’s inner workings of these discussions with the release of some minutes from their last meeting. Now, I want to remind our viewers this was Chair Powell’s last fed meeting and discussion and interest rate decision as chair. We’re coming in under a different chair into our future meetings with Kevin Warsh. So please don’t take this all as one for one.

But what I really want to get at today is those four no votes, those dissents. It wasn’t so much dissents on the side of the interest rate decision specifically, but we did have some increased discussion and really some increased tensions around the statement itself. So I’m going to read a couple of quotes that came out of these minutes, and really where these four participants disagreed from the group as a whole. The key quote that we want to get at here is a majority of participants highlighted, however, that some policy firming would likely be appropriate if inflation were to continue to run persistently above two percent.

So in fed parlance, many individuals does not constitute a majority. So it’s important to know that the majority was there. And the key distinction that we want to make is the additional adjustments to rates. that was talked about in various parts of that statement. This phrasing is something that markets take to understand as that the next rate would be a continued cut, that this would be an additional adjustment on top of those cuts we’ve already seen, rather than a move in a different direction or clearly just holding rates steady. So where the minutes talking about, um, potentially the next move being down, not up, these four participants disagreed. Uh, these are likely of the reserve Bank presidents, which have a slightly different structure. So we’ve done this before, but let’s take a quick step back.

One of the big questions that we’re getting here at ITR and in fed watching circles is just how much power does Warsh have as he comes in as the new chair. And I’d love to remind our viewers that he is only one vote on that committee. Now. He is the one responsible for gaining consensus and bringing the whole group together. But he doesn’t get to single-handedly decide policy. Who actually votes on this committee? First we have the seven members of the Board of Governors. Now these are staggered fourteen-year terms. So very long ranging. This is again Chair Powell, even though he’s no longer chair, still does maintain his seat in that fourteen year term that he has not yet completed, for as long as he wants it until that seat as a member of the Board of Governors, the remainder of those votes are a the president of the New York Fed and then four of the remaining eleven reserve Bank presidents. These are all local fed.

So your local fed, Federal Reserve Bank of Boston or Bank of Saint Louis or whatever else. There are twelve of those across the country. And in any given year, four of the remaining non-New York presidents will have voting seats next year. That will rotate out into four different ones. Critically, these seats are not nominated by the president or the administration, but by a local group in each of those regions. So we’re getting a slightly different type of individual, right? A different type of political background to the folks that come in on those seats. And these are rather long terms. Even though you’re only voting for one year at a time. These have been some of the most vocal proponents of watching inflation, of being concerned that inflation is headed higher. So to see those no votes coming predominantly from this group and seeing more and more messaging come out from this group of reserve Bank presidents. That’s important to watch.

Now overall, this is not a huge disagreement in direction. Really. These are all academic reasons. Each of these individuals is pushing the policy that they feel will propel the fed and the country in the right direction. So I really want to take this back. It’s not a political fight. This is not a red or a blue issue. It is just coming down to, in some cases, those boring academic visions of just where rates should be and where long-term growth even can be. So that’s why we’re going to get a little bit more nitty gritty in these types of discussions in the near term, watching these future interest rate decisions, it’s going to be about unpacking some of these statements a little bit more closely. But we will be doing that all right here for you, as well as following all of the latest data as it comes out. Please stay with us right here on ITR Economics Fed Watch.