One Sentence Rewrites The Federal Reserve! After Waller Relented On 9/3, The Suspense Of A Rate Hike In September Shifted To Powell

As soon as he finished speaking, the probability of a September rate hike shown by CME FedWatch tools plummeted from about 63% the previous trading day to around 50.5%. That same night, Jim Bianco, president of Bianco Research and a macro strategist with 40 years of experience, quickly updated his "vote count" on social media: 6 votes in favor of keeping rates unchanged, 5 in favor of a rate hike, and 1 vote still unclear. That "silent vote" is Jerome Powell, who will resign as Fed Chair and become a Fed Governor in mid-2026. This 1 vote is enough to turn the September rate meeting into a 6:6 draw, the first time the Fed has not seen since 1936.

The pressure comes from the White House. At a press conference on September 3, U.S. Vice President J.D. Vance made a rare public statement on monetary policy: "Rising interest rates mean higher borrowing costs. We believe the Federal Reserve should lower interest rates." "One of the main reasons the president pays close attention to interest rates is that he hopes Americans can afford homes." This was the first time the Trump administration had its "second-in-command" raise the issue of "Federal Reserve independence" in front of the camera.

In the next nine days' data window, the August nonfarm payrolls at 20:30 tonight and the CPI for 9/11 next Thursday will serve as the "first round of screening" and the "final verdict," respectively. If a 6:6 tie occurs, the Federal Reserve Act has no explicit provisions. Based on this, Bianco speculates that the Fed will continue to keep the federal funds rate unchanged at the current range.

Waller Finally Relaxed And Rewrote The Entire Ticket

Looking back over the past twelve months, this 67-year-old Fed governor has completed a full pendulum: in the second half of 2025, he has taken a firmly dovish stance, with three rate cut votes in September, October, and December; Entering the first quarter of 2026, he shifted to a "slow rate cut, no rush"; Turning hawkish in May, he stated on July 13 that "if inflation heats too high, we will consider raising rates." On September 3, he shifted his wording from "rate hike" to "maintain," the most explicit direction this "pendulum enthusiast" gave during the same divergence cycle.

His remarks that evening were not only directional, but also contained three arguments that reassured the market. First, the three-month annualized core inflation rate has dropped from 4.76% in February to 3.05% in July, showing "encouraging speed of decline"; Second, he no longer sees high energy prices and tariffs as sources of sustained inflationary pressure; Third, the transmission of tariffs to prices "has largely been reflected in the inflation data," and the previously feared spread of oil prices to other goods and services has not yet occurred. But he also left a fallback plan: "My decision will be largely influenced by the August inflation data," and if inflation does not cool further, he will consider supporting rate hikes

This "conditional maintenance" determines the fragility of the September vote. Waller's vote shifted from "rate hike" to "maintain," meaning the "maintain" camp no longer needs to spend ammunition trying to persuade him; and the "possibility of a rate hike" he retained could be realized at any time with the August inflation data. Before the data window opened, Waller's stance was only to "temporarily freeze" the vote at 6:5:1, without fundamentally resolving the difference.

The true structure of the September vote show is "6+1 vs 5." If Powell chooses to maintain it, the maintainers will safely pass with 7 votes to 5; If Powell chooses to raise rates, the vote will be tied 6 to 6. According to the legal logic cited by Bianco, the Federal Reserve Act does not specify how to handle the tie, so it is assumed that the status quo (neither increase nor decrease) will remain unchanged. In other words, in an environment where data is unclear, political pressure is mounting, and the chairman remains hawkish, the vote of the silent not only decides "to raise rates or maintain," but is already enough to determine policy outcomes.

This is also a vote pattern the Fed has not seen in nearly a century. Since 1936, there has been no official vote record of a 6:6 tie. Once this vote pattern forms in the market, several key questions immediately come to the forefront: does the Federal Reserve Act's convention of "if passed, the status quo remains unchanged" still holds? Will Walsh use his chairman's privilege to publicly guide expectations? These temporary changes in implicit rules themselves could become sources of volatility for risk assets.

Vance Pressures The Federal Reserve

At the press conference on the same day, Vice President Vance almost verbally and forcefully threw the White House's demands directly to the Federal Reserve case. His exact words were: "Clearly, the President is very concerned about interest rates, and one of the main reasons he wants Americans to be able to afford homes is that they want Americans to be able to afford homes. Rising interest rates mean higher borrowing costs. We believe the Fed should cut rates, which is an 'appropriate and responsible' response to recent U.S. inflation data.

Vance's statement marks the first time the Trump administration's "second-in-command" has publicly set the tone on monetary policy in front of the camera. This is not an isolated move: Trump has publicly pressured Wash, whom he personally picked, multiple times before, and is still trying to fire the alleged governor Lisa Cook. Vance's September 3 speech echoed the above actions. The White House insists that "the president is focused on interest rates" is a concern for affordable housing; critics see this as a stress test of the Wash's team's independence boundaries, and if the Fed succumbs to political demands and changes its policy direction, the entire central bank's credibility foundation will be undermined.

But Wash's own posture is precisely the most intriguing part of this drama. Since taking office as chairman in mid-2026, Wash has clearly expressed a "hawkish preference," and at the Jackson Hole Global Central Bank Annual Meeting, he stated that "inflation cannot be solved within nine weeks." But in front of the camera, Wash insists on two actions: first, he embraces the public expectation of "low interest rates" and verbally remains "open" to rate cuts; second, he effectively ties decisions back to hard data.

This "hawkish stance + low interest rate openness" stance gave Walsh accountability to the White House in both directions and left room for market decision-making. Waller's shift to maintaining on September 3 and Williams' dovish stance on September 2 gave Walsh a way out. Vance's "rate cut call" on the same day put the White House's expectations on the table ahead of schedule: 12 votes plus a White House pressure gauge, a pressure net quickly closed

Data Decides The Outcome: Tonight's Nonfarm Payrolls And Next Thursday's CPI

The August nonfarm payroll report, released at 20:30 tonight, is the first hurdle. The market generally expects about 55,000 new jobs (the previous figure has been significantly revised down to -23,000), the unemployment rate at 4.1%, and average hourly earnings up +3.0% year-on-year. Waller's "ideal figure" on September 3 is not "worse is better," but "just right": between 40,000 and 60,000 is enough to confirm a mild slowdown in the labor market without overshadowing the "recession" narrative.

If the nonfarm payroll data falls between 40,000 and 60,000, demand for U.S. Treasuries and U.S. stocks will be supported, the economy will not heat up, and there will be no reason to continue rate hikes; and without a sharp cooldown, the room for rate cuts will be suppressed. If the data is significantly below 40,000, Waller's "maintain" stance will be strengthened, but at the same time, the market will reverse-priced in a "recession," and reverse selling pressure from risk assets will push up 10-year Treasury yields and lower the S&P. If the data is significantly above 80,000, the narrative of a "September rate hike" will return, and Waller's dovish statements will be partially priced back.

The final ruling will be made on August CPI, to be released next Thursday, 9/11. Waller anchored his judgment at the "three-month annualized CPI," which has dropped from 4.76% in February to 3.05% in July, and he called for this indicator to continue its downward trend. If August CPI year-on-year remains at 3.4% or continues to decline, voters who "maintain" will have confidence; If CPI rises above 3.6% again, Waller's pre-reserved "rate hike possibility" will be priced in by some voters. The August ISM Services PMI Price Payments Sub-Index rose to 72.6 on September 3, the highest since August 2022. This is one of the few hard indicators that directly confirms the stickiness of service inflation and is an area repeatedly labeled as "risk" by the Waller team

The "Voting Show" Is, To Some Extent, A Reshaping Of The Federal Reserve

The deeper significance of this vote is to push the Fed's decision from the "chair setting tone + committee members seconding" model to a "collective vote + data ruling" model. In recent years, every public statement by the Wash's team has been magnified and interpreted by the market. But today's situation is: 12 voters are dispersed and each has their own stance; any piece of data or any sudden statement could rewrite one side's vote. From a game perspective, this new model brings changes on three levels:

First, data sensitivity has risen sharply. Any indicator that affects the key 1 vote out of 12 will trigger an overreaction in asset prices. Tonight's nonfarm payrolls, next week's CPI, or any speech by a governor before the September 1-16 FOMC meeting could all be sources of a 1-vote / 0.01% bias.

Second, political pressure is becoming more apparent. Vance's September 3 remarks have brought "Federal Reserve independence" back into the spotlight of market discussion. Whether Walsh's "hawkish regime" stance can balance data with White House demands is the most important implicit constraint in a series of decisions after September.

Third, the possibility of a historic bill pattern. If Powell ultimately chooses to raise rates, a 6:6 split could occur on September 15-16—something that has never happened in the Fed's history since 1936, and the Federal Reserve Act does not explicitly clause a tie. The market will temporarily lose judgment on the implicit rule of "status quo."