Three dissenting votes from the FOMC + support from four regional Federal Reserve board members for interest rate hikes reveal divisions within the Federal Reserve.

The minutes of the Federal Reserve's discount rate meeting published on Tuesday revealed that prior to the Fed's July policy meeting, boards of directors from four of the twelve Federal Reserve Banks voted in favor of raising the discount rate. This rate hike proposal was ultimately rejected by the Fed's decision-making body. At the FOMC meeting held from July 28 to 29, the Federal Open Market Committee decided by a vote of 9 to 3 to keep the policy rate unchanged, with the current target range for the federal funds rate set at 3.5% to 3.75%. Dallas Fed President Lorie Logan, Cleveland Fed President Loretta Mester, and Minneapolis Fed President Neel Kashkari cast dissenting votes, advocating for a 25 basis point increase. Additionally, two non-voting regional Fed presidentsKansas City Fed's Esther George and St. Louis Fed's Jim Bullardindicated that they would also support a rate hike if they had voting rights. Members of the boards of directors of the regional Federal Reserve Banks are not policymakers and do not directly determine the Fed's direction on rates. However, they meet regularly with the presidents of their respective regional banks, who have stated that the directors' opinions hold some reference value for their policy positions. According to the procedure, the boards of directors of the regional Fed Banks vote on the discount rate during regular meetings, but the final decision on the discount rate lies with the Board of Governors of the Federal Reserve, which is typically set to align with the upper limit of the target range for the policy rate. From the discount rate voting to the dissenting votes at the FOMC meeting, internal policy divergences within the Fed are becoming increasingly clear. The market's attention is now turning to the September policy meeting. The CME FedWatch Tool indicates that there is a 60.4% probability that the Fed will keep rates unchanged by September, while there is a 39.6% chance of a cumulative 25 basis point increase. Looking further ahead, the probability of maintaining the rate unchanged by October is 45.7%, with a 44.7% chance of a cumulative 25 basis point increase and a 9.7% chance of a cumulative 50 basis point increase. Karen Ward, Chief Market Strategist for Europe, the Middle East, and Africa at Morgan Asset Management, stated that the signals from the U.S. labor market suggest that the Fed "should not raise rates" in September. She also expressed concern over the U.S. Treasury's intervention in the bond market. Ward further noted that the market hopes Fed Chair Kevin Walsh will provide "more clear guidance" during his speech at the annual Jackson Hole symposium on Friday regarding how the Fed views the economic situation and which factors are critical for rate decisions.