What is FOMC?

Jim Bianco on the stock market still treating the Fed as a one-man show despite independent FOMC voting.

“I don't think the stock market's gotten the memo. They still think it's only one guy, the Fed chairman, parse every syllable he says, he will tell the other 11 how they can vote, when they can go to the bathroom and that's kind of the way the world the Fed works.”

Jim Bianco explains why markets whipsaw on individual Fed speaker comments: the market still assumes the chair controls all 12 FOMC votes, when in reality voters are now acting independently and reveal a much more hawkish stance.

“I don't think the stock market's gotten the memo. They still think it's only one guy, the Fed chairman, parse every syllable he says, he will tell the other 11 how they can vote, when they can go to the bathroom and that's kind of the way the world the Fed works.”

FOMC voters are proving far more hawkish than the Fed chair once allowed to act independently, suggesting the chair had been suppressing dissent and masking the committee's true policy preference.

“Now, the voters are allowed to act independently and we're finding out that they are a lot more hawkish and probably were disposed to raising rates a lot sooner than this that unfold.”

Fed watching has shifted from parsing one chairman's words to tallying 12 independent votes, because Kevin Warsh has abandoned forward guidance and FOMC members are now voting as suppressed hawks freed from chairmanly control.

“Fed watching is not a game of parsing the chairman's words.”

Jim Bianco on the stock market failing to reprice for a more fractious Fed.

“I don't think the stock market's gotten the memo. They still think it's only one guy, the Fed chairman, parse every syllable he says, he will tell the other 11 how they can vote when they can go to the bathroom, and that's kind of the way the world the Fed works.”

Jim Bianco on the structural break in how the Fed operates under persistent political pressure.

“Everybody at the Fed because of the incessant attacks by Trump on the Fed is now said that they're independent. They're going to assess the economy and inflation and they're going to vote as they see fit. They're not going to wait for the chairman to tell them how to vote. That's the way it's worked for 40 years. Doesn't work that way anymore.”

Jim Bianco on the Fed's new dynamic as suppressed hawks vote independently.

“The Fed is independent, they vote independently, and a lot of these members have been suppressed hawks and now they're allowing to show their hawkishness.”

A Fed chair being outvoted by the rest of the FOMC is a non-zero probability, something effectively unprecedented in modern Fed history.

“I could see that and it wouldn't be a stretch for me to say maybe not now, but somewhere along the line we might see a chairman out voted.”

Trump's attacks on the Fed have paradoxically made FOMC members more independently minded, breaking a 40-year norm where the chairman effectively directed member votes.

“Everybody at the Fed because of the incessant attacks by Trump on the Fed is now said that they're independent. They're going to assess the economy and inflation and they're going to vote as they see fit. They're not going to wait for the chairman to tell them how to vote. That's the way it's worked for 40 years. Doesn't work that way anymore.”

Jim Bianco on Powell potentially becoming the swing vote at the FOMC regardless of his own preference.

“Powell could be the swing vote. In as early as the June meeting, he could be the swing vote, whether he likes it or not.”