Minutes released Friday from the April 15-16 Federal Open Market Committee meeting revealed the deepest internal divide at the Federal Reserve since the 2022 tightening cycle, with three voting members — Governors Christopher Waller and Michelle Bowman, along with Chicago Fed President Austan Goolsbee — advocating for an emergency 50-basis-point rate cut rather than the quarter-point move ultimately approved.
The hawkish majority, led by Chair Jerome Powell, cited sticky core inflation of 3.4% and elevated energy prices as reasons to maintain a "measured" pace of easing. The dissenting trio argued that labor market weakness — April nonfarm payrolls came in at just 78,000 versus 145,000 expected — combined with collapsing consumer confidence warranted a front-loaded response to prevent recession.
Treasury Market Reprices Rate Path
Fed funds futures now price a 62% probability of a 50-basis-point cut at the June meeting, up from 34% before the minutes were released. The 2-year Treasury yield tumbled 11 basis points to 3.62%, while the 10-year slipped 4 basis points to 4.11%. The yield curve steepened, with the 2s10s spread widening to 49 basis points, its highest level since 2022.
Powell is scheduled to deliver a keynote address at the Hoover Institution on Tuesday, which markets will scrutinize for signals on whether the Chair is prepared to endorse a more aggressive cut given evolving economic data. A Wall Street Journal report earlier this week suggested Powell has privately expressed concern about being "behind the curve" if Iran-driven energy costs persist.
Trump Pressure Intensifies
President Trump, in a Truth Social post Friday, called for "at least 100 basis points of emergency cuts" and renewed criticism of Powell, whose term as chair expires in May 2026. Trump has publicly floated Kevin Warsh, Kevin Hassett, and Treasury Secretary Scott Bessent as potential replacements, though Bessent has said he is not a candidate.
The dollar weakened 0.9% on the DXY to 104.3 on the dovish minutes, with the euro climbing to $1.126 and the yen strengthening to 148.2 per dollar. Gold surged $38 to $3,294 per ounce as real yields tumbled. ING Economics now projects the Fed will deliver 125 basis points of cuts in 2026, up from its prior 75-basis-point forecast.