In the world of banking and politics, the intersection is what will the Federal Reserve Bank do? For generations, politicians love lower interest rates, but the economy moves in cycles. To battle inflation, interest rates need to go up for the Federal Reserve to try to ensure inflation does not get out of control. During President Trump’s second term, President Trump wants interest rates to fall even further, but the economy moves in cycles.

In an article by Vidya Ranganathan of Reuters, the US central bank policy-setting Federal Open Market Committee is the most divided it has been in years.

The largest investment banks Morgan Stanley, JPMorgan Chase and BofA are watching the Fed very carefully and make their calls before the meetings.

Analysts expect as many as 5 of the 12 voting members of the FMOC will have divergent views, reinforcing the refrain in markets that the Fed is turning more political.

The policy committee has not had 3 or more dissents at a meeting since 2019, and that has happened just 9 times since 1990. Analysts now expect such dissent will persist.

President Trump’s appointees to the Fed’s 7-member Board of Governors have been dovish.

Fabio Bassi, head of cross-asset strategy at JPMorgan says investors should not focus only on the December meeting. Powell’s Fed which is in charge now, is not leaning towards very aggressive action, they are delivering insurance cuts.

President Trump, however seems bent on lowering costs ahead of the US midterm elections next year.

Linking to dividend paying stocks, the yield is the yield and as interest rates get cut, the yield on dividend paying stocks relative to bonds gets better. When you add in the possible increase in the value of the stock for a total return, often times dividend paying stocks beat holding many bonds. This means you need to listen to what the Fed has to say, but take advantage of it because there are many variables in any economy.

There are more questions than answers, till the next time – to raising questions.