Despite the surge in oil prices following the attacks on Saudi oil facilities over the weekend, which has added a new risk factor to the US economy, which has been hampered by trade frictions and a weak global economic climate, the clear divergence of positions among senior Fed policy makers means that further interest rate cuts may be full of suspense.
The pigeon camp is headed by Saint Louis FED President Brad and Minneapolis FED President Kashkari, who are expected to advocate substantial interest rate cuts in response to low inflation and the upside-down of the U.S. Treasury yield curve.
Opposition is expected to come from Cleveland FED President Master and Philadelphia FED President Huck. Meester voted against the Fed's rate cut in July. Huck was only reluctant to support interest rate cuts and said he wanted to keep them at current levels "to see how things change".
Federal Reserve Chairman Powell is sitting in the center, and he needs to bring these ideas and the views of 12 other policymakers to the board to reach consensus.
The biggest challenge is to understand the economic data. These data suggest that American manufacturing may be shrinking, inflation is still low, although households are still consuming, and businesses as a whole are adding a lot of jobs.
"The differences are very clear," said Gregory Daco, chief American economist at the Oxford Institute of Economics. "If you look at the current economy, you'll see the dual performance of the economy... The key question is whether the weakness will penetrate into the economy, and whether it will intensify."
Since the Federal Reserve voted 8-2 at its July meeting to cut interest rates, U.S. economic data have been mixed.
Strong retail sales and sustained wage growth may have reinforced Boston Federal Reserve Bank President Rosen Glenn's belief that the current economic situation does not support further easing. He voted against the July policy decision.
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