What to Know Ahead of the Fed’s Next Rate Decision

Last Friday, Fed Chair Jerome Powell signaled that a rate cut may be on the table, noting that the “shifting balance of risks may warrant adjusting our policy stance.” His comments were one of the key takeaways from the annual Jackson Hole Economic Symposium, where central bankers and economists gather to discuss the global economy.

So far this year, the Fed has kept its main interest rate, the Fed Funds Rate, unchanged, aiming to balance inflation concerns with the need to support job growth. But as signs of a cooling labor sector grow, so does the pressure for the Fed to cut rates at its next meeting on September 17.

With so much attention on this upcoming decision, it’s worth taking a quick look at who actually makes these calls, and what their perspectives might be.

Who Makes Decisions About Interest Rates?

When you hear that “the Fed” is changing interest rates, the actual decisions come from a group called the Federal Open Market Committee (FOMC). This committee plays a key role in shaping U.S. monetary policy, especially when it comes to interest rates and the broader economy.

The FOMC is made up of 12 voting members:

• The seven members of the Federal Reserve’s Board of Governors
• The President of the New York Fed, who always has a vote
• And four of the remaining 11 regional Federal Reserve Bank presidents, who rotate into voting roles each year

Even the regional Fed presidents who aren’t voting members still attend the meetings. They actively participate in discussions and share insights about economic conditions in their districts, which helps shape the committee’s overall view.

The FOMC meets eight times a year to review the latest economic and financial data. During these meetings, they assess things like inflation, employment and overall economic growth to determine whether interest rates need to be adjusted or left alone. Their goal is to support stable prices and maximum employment over the long term.

Doves vs. Hawks: Two Different Perspectives on Policy

Within the Fed, and especially on the FOMC, you’ll often hear members described as either “doves” or “hawks.” These labels reflect how individual policymakers tend to view inflation, interest rates and the economy.

Doves typically prioritize supporting employment and economic growth, and are often more comfortable with keeping interest rates lower for longer, even if inflation is slightly elevated.

Hawks are more focused on fighting inflation, even if that means raising rates or slowing parts of the economy. They see price stability as the foundation for long-term economic health.

These aren’t rigid labels. In fact, many Fed officials adjust their views in response to changing economic conditions. For example, while the Fed unanimously voted to hold rates steady at its first four meetings of the year, that unity began to shift in July. Fed Governors Christopher Waller and Michelle Bowman broke from the majority by favoring a 25 basis point cut, citing signs of weakness in the labor market and broader economy. Their dissent highlights how evolving data can lead to different policy conclusions even within the same committee.

Shifts in Fed leadership could also influence the direction of policy. Fed Governor Adriana Kugler recently resigned, leaving a vacancy on the Board of Governors. President Donald Trump has nominated Stephen Miran – considered a dove in favor of cutting rates – to fill that seat. However, it’s unclear whether the Senate will confirm his nomination in time for the September 17 meeting.

In addition, President Trump has attempted to remove Fed Governor Lisa Cook after allegations of mortgage fraud surfaced. Cook has denied the allegations, and the attempt to fire her is expected to face legal challenges in court. If Trump is ultimately successful, he would likely appoint another dove, which could further shift the Fed’s policy stance heading into the fall.

Bottom Line: The Fed is walking a fine line, working to tame inflation without pushing the economy into a slowdown. Powell’s recent remarks suggest a rate cut is on the table, but the decision will largely depend on the data that comes in over the next few weeks, especially the August Jobs Report due on September 5. All eyes will be on the September 17 meeting and the direction it sets for monetary policy moving forward.

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By Shelly Williams