Walsh Has Been Forced to the Rate Hike ‘Guillotine’: If Not Raised, the Fed’s Credibility Will Be ‘Decapitated’

On July 29th, the Federal Reserve maintained its interest rates unchanged with a 9-3 vote. On the surface, this was a move to “hold steady”; in fact, it was the closest the Fed has come to a rate hike since Walsh took office.

The three dissenting votes—Cleveland Fed President Mester, Minneapolis Fed President Kashkari, and Dallas Fed President Logan—all called for a 25 basis point rate hike. This marks the first time since September 2016 that three votes have unified toward a hawkish stance. At the press conference, Walsh downplayed the event, saying he “asked for a good family debate, and certainly got one.” However, the structure of the voting reveals a more serious issue than his humor suggests: one-fourth of the twelve members already believe the current interest rate is not high enough.

However, internal division is just what's visible. What is truly pushing Walsh to the brink is the invisible hand—the market pricing.