Recently, it seems that the institution managing money in the U.S., namely the Federal Reserve, is about to erupt in internal conflict. This matter relates to each of our wallets, as their every move affects the value of money worldwide.
The cause of the situation is a woman named Michelle Bowman. She is not just anyone; she is the Vice Chair of the Federal Reserve and her words carry significant weight. Just recently, she spoke out in a way that made the entire market sit up and take notice.
She said that given the current situation, a rate cut is necessary, and not just once, but ideally three times this year. She even specified the timing and strongly urged action to begin in September.
These words carry significant weight. It's important to note that just a few months ago, Bowman was a staunch advocate for maintaining high interest rates. She always believed that prices needed to be controlled to prevent further increases. However, starting in June, her attitude made a complete 180-degree turn. By July, she openly opposed her colleagues and publicly supported rate cuts.
Now, she urges her colleagues once again, no more hesitation, action must be taken in September. She fears that if they don't act soon, the jobs of ordinary people will be at risk. If they wait until many are unemployed and the situation worsens, it will take even more effort and cost to remedy. It's better to act now to prevent problems before they arise.
Bowman was appointed by former President Trump in 2018. She also mentioned a concern that many people have about tariffs. Many worry that the U.S. imposing so many tariffs on foreign goods will ultimately pass the costs onto American consumers, making things increasingly expensive. However, Bowman now feels this concern is somewhat excessive. She believes that the price increases caused by tariffs should only be temporary and will not continue indefinitely.
Since the risk of rising prices is not so great now, the most pressing concern should be the job security of ordinary people. She believes that the Fed's focus should shift from controlling prices to protecting jobs.
Why has Bowman's attitude changed so quickly? Because she has seen some very alarming numbers.
These numbers are about Americans finding jobs. Originally, everyone felt that the U.S. job market was quite good, with not many unemployed. But as soon as the latest report came out, everyone was stunned.
The key information in this report sends chills down one's spine:
In July, the U.S. only added 73,000 jobs.
This number is far below everyone's expectations. Worse still, the report also revised the data from the previous two months.
The data from the previous two months was suddenly revised downwards by nearly 260,000 jobs.
What does this concept mean? It's like thinking you have money in your bank account, only to find out that not only is there none, but you've actually lost a large sum. This indicates that the 'good situation' everyone saw before was actually fake, an illusion.
The number of unemployed people is also quietly increasing.
The unemployment rate rose from 4.1% to 4.2%, and Bowman even stated that this number is 'close to 4.3%'.
Over the past three months, the U.S. has averaged only 35,000 new jobs per month. This pace is much slower than earlier this year. Economists used to think that at least 100,000 jobs needed to be added each month for it to be considered healthy. Now, this number is less than half.
These cold hard numbers are the fundamental reason for Bowman changing her mind. She sees that the economic engine is stalling, and if they don't step on the gas now, it may come to a complete stop. She predicted at the end of last year that there would be three rate cuts this year, and now these terrible employment numbers only reinforce her belief that her judgment is correct.
Now, almost everyone in the market believes that a rate cut in September is a done deal. According to data from something called the 'CME Fed Watch,' the likelihood of a rate cut in September is already as high as 88.9%. The only remaining suspense is not whether to cut, but how much. Will it be a small cut just to show intent, or a larger cut as a strong measure?
Not everyone within the Fed thinks like Bowman. Now, this most powerful financial institution in the U.S. has clearly split into two factions, arguing fiercely.
One faction, we can call them the 'job-first faction.'
The leaders of this faction, besides Bowman, include several regional Fed presidents, such as Daly from San Francisco, Kashkari from Minneapolis, as well as governors Waller and Cook. They are all very worried about the latest employment data, feeling that the risks of an economic downturn are too great, and if rates are not cut soon, the labor market will collapse. They believe the top priority is to preserve economic growth and jobs for ordinary people.
The other faction, we can call them the 'inflation-first faction.'
The representatives of this faction are New York Fed President Williams and Richmond Fed President Barkin. They believe that the job market is not yet in such a dangerous situation, that a weak camel is still bigger than a horse, and that there is still some resilience. Their greater concern is whether inflation will return. If they rush to cut rates now, an influx of money could push prices up again, making all previous efforts in vain.
These two factions cannot persuade each other. They look at the same economic data but come to completely opposite conclusions. One thinks the house is about to collapse and needs urgent repairs; the other thinks it's just some peeling paint, and there's no need to panic, just be careful not to damage the foundation.
The core of this disagreement is actually a fundamental difference in judgment about the current state of the U.S. economy.
So, the question arises. With such internal strife, whose opinion should we listen to in the end?
At this point, everyone's attention is focused on one person. That person is the head of the Federal Reserve—Chairman Powell.
He is the one who can make the final decision.
Now, Powell is like standing at a crossroads. To the left, he listens to Bowman and others, quickly cutting rates to protect jobs; to the right, he listens to Williams and others, holding steady and observing inflation. Every decision he makes pulls at the nerves of the entire globe.
Soon, there will be an opportunity for the whole world to glimpse Powell's inner thoughts.
That is the Jackson Hole Global Central Banking Conference, which will be held from August 21 to 23. This meeting is seen as a barometer for global monetary policy. Every year, the Fed chair gives an important speech here, revealing the direction of upcoming policies.
If Powell truly believes that the Fed's focus has shifted from combating inflation to saving the job market, he is likely to send a clear signal that policy is about to change at this year's conference.
At that time, global investors will adjust their portfolios based on his words. A massive game concerning the global economy and wealth is about to unfold. And we are all spectators in this grand play, and even participants. The September policy meeting looks destined to be anything but calm.