Wells Fargo's Michael Schumacher says Fed minutes making him 'a bit less confident' about September

Federal Reserve Policy & Economic Concerns - The Federal Reserve (Fed) is divided, with concerns about tariffs, inflation, jobs, and the labor market [1] - Tariffs may drive inflation, but also hurt jobs, creating conflicting pressures on the Fed regarding rate cuts [2] - More committee members are concerned about inflation and unemployment, but there were two dissents by governors, indicating unusual circumstances [2] - Fed Chair Powell wants more data and to wait before making decisions, increasing the risk of waiting too long [3] - The market anticipates an easing cycle with multiple rate cuts, and Powell may not be able to control this expectation even with a single cut [5] Bond Market Dynamics - There's a divergence in bond markets, with short-term rates (five years and under) driven by central banks and long-term rates driven by fiscal policy [7] - A buyer strike on 30-year bonds exists due to concerns about fiscal policy, which the Fed likely cannot fix [7] Neutral Rate & Monetary Policy Tightness - The Fed funds rate is slightly higher than the 2-year yield, suggesting a moderately tight monetary policy [11] - The Fed's uncertainty about the neutral rate (estimated at 3%) contributes to its reluctance to act quickly [11][13] - The market has priced in an easing cycle with a terminal rate below the neutral rate, but current policy is somewhat tight because the Fed is unsure of the neutral rate [12][13] Powell's Upcoming Speech - Powell is expected to discuss the Fed's challenges and accomplishments since 2018, as well as the Fed's new 5-year framework [8] - Powell is expected to talk very little about policy for the next few meetings [9] - If Powell opens the door to future policy changes, the market will react significantly [10]