A voice with 15 years inside the Fed's meeting room has offered a rare insider vote count: the Federal Open Market Committee (FOMC) is almost evenly split on a September rate hike. Former St. Louis Fed President Jim Bullard stated last Friday that the committee is roughly 50-50, comparing it to a 10-9 vote where either outcome is possible. He noted that many undecided members could be swayed in either direction.

This is the closest thing to an internal tally in public records, and it arrives as markets had already considered the debate settled. Fed Chair Kevin Warsh acknowledged at the Kansas City Fed's Jackson Hole symposium that the central bank bears responsibility for 65 months of elevated inflation. Following his remarks, CME FedWatch data showed September rate hike odds jump from around 36% to roughly 60%, with the probability of a cut nearly vanishing.

The public record suggests hawks appear to be a minority. On July 29, the committee voted 9-3 for a fifth consecutive pause, with Cleveland Fed's Beth Hammack, Dallas Fed's Lorie Logan, and Minneapolis Fed's Neel Kashkari dissenting in favor of a hike. Kansas City Fed's Jeff Schmid also indicated last week he has joined the hawkish camp. Yet Bullard believes the undecided figures are far more numerous than the voting record reveals. Bullard, who led the St. Louis Fed from 2008 to 2023 and dissented in March 2022 over slow committee action, now serves as dean of Purdue University's Daniels School of Business.

Holding Steady Can Sound Hawkish

Bullard's most valuable remark was a caution against treating September as a simple binary choice. He explained that the committee could hold rates unchanged while still delivering a hawkish message, or it could more or less signal a move at the October or December meeting. The key mechanism is the dot plot, the quarterly chart where each official marks their year-end rate expectation, and September happens to be a dot-plot meeting. Bullard noted the irony that September offers the most forward guidance because the dots communicate the committee's intentions for the federal funds rate through the end of 2026. He speculates the dots will show one, possibly two, hikes before year-end, meaning the committee could hold in September while still conveying a tightening path for the year. Bullard had expected Warsh to abolish the dot plot during his Friday speech, but that didn't happen.

Regarding which risk is greater—signaling a hike that never materializes versus saying nothing after the speech—Bullard declined to choose, calling it a 50-50 call. He also avoided framing the chair as contradictory, suggesting Warsh opposes overly explicit guidance. If Warsh stated outright that September will or won't bring a hike, that would over-commit the committee. The case for tightening no longer depends on the next data release, according to Bullard. The committee has already acknowledged it can get core PCE inflation to near 3% by year-end, very similar to the Decembers of 2023, 2024, and 2025, with little actual progress in recent years.

Three Years of Stagnation

Headline PCE has risen 3.7% over twelve months, while the six-month annualized pace sits at 4.1%, indicating the recent stretch is hotter than the full-year figure. Gold serves as the Fed's report card, and the Fed is reading it. Warsh's Friday speech effectively acknowledged the central bank's responsibility for inflation. Bullard explained how that admission is priced in, noting that gold remains a potential indicator of eroded confidence in the Fed. If credibility is being damaged, gold prices typically rise. A former voting member calling gold a signal, watched by those being graded, echoes an argument gold holders have made for years that has often been dismissed as sentiment.

Bullard also outlined who the real buyers are, and they are not in Washington. Central banks have been net buyers for nearly two decades, collectively holding well over one billion ounces. He highlighted that foreign central banks may prefer gold over Treasuries, with some already diversifying away from US debt, though this issue receives less attention in America than overseas. He characterized this as portfolio management rather than politics. The US holds roughly 261 million ounces of gold, booked on government balance sheets at the statutory price of $42.22 per ounce—a figure only Congress can change—valuing the holdings near $11 billion on paper, while market prices put them well above $1 trillion. Bullard questioned why the gold isn't marked to market, noting everyone knows the market price and marking to market is always preferable to letting book values distort reality, which would require congressional action. He added that discipline must apply in both directions, including downward adjustments when prices fall.

Fiscal and Data Warnings

On the fiscal front, Bullard's message is that pressure on long-term yields is structural, and the tools aimed at it won't work. Starting September 9, the Treasury will double its 10-to-30-year buyback operations from $2 billion to $4 billion per operation, but Bullard sees little impact from this, siding with investor Stan Druckenmiller who publicly opposed the plan. Intervening in a massive global market with a large foreign buyer base is extremely difficult. These are tactical moves, while markets price fundamental policy, and he doesn't believe this will shift the long-term trend. It might move a day's trading but not the broader direction. The real large-scale borrowers are Congress and the President, with a 6% deficit showing no end in sight and no apparent concern in the political system about curbing it. Total federal debt surpassed $40 trillion this month, with public holdings around $32.3 trillion, and Bullard projects the path leads to 120% or 150% of GDP in publicly held debt.

When asked if protecting Fed independence means hiking even if it significantly worsens Washington's interest bill, he answered affirmatively, noting that every politician he's met believes nominal rates should be lower, even during the zero-rate era when there was lobbying to push them down further. The Fed is also making decisions on data Bullard considers partly broken. The Labor Department's annual benchmark revision showed 79,000 fewer jobs in the past year than previously reported, with private payrolls revised down by 178,000 and government jobs up by 99,000. Nonfarm payroll numbers can no longer be trusted as they were decades ago because immigration policy has undergone dramatic shifts, with payroll growth running at near zero compared to the previous pace of 100,000 to 150,000. Negative monthly readings must be accepted, even though that doesn't contradict a healthy labor market. This statement will reshape every subsequent jobs-Friday narrative: a negative print doesn't necessarily mean something is breaking.

Regarding the University of Michigan survey—showing households expecting 4% inflation over the next year, 3.3% over 5-10 years, and confidence falling to 51.7—Bullard sides with markets. He would rather listen to markets where participants put real money at stake and directly price inflation risk. The Michigan survey's credibility has eroded in recent years, with respondents expressing views on the political climate while having no money riding on the outcome. Warsh also brought the money supply back into discussion during his Friday speech, and Bullard considers this serious, pointing to M2 growth that surged in 2020-2021 before collapsing, foreshadowing the subsequent inflation.

Precious Metals Under Pressure

Putting the pieces together yields a central bank that admits responsibility for the past five and a half years, yet cannot agree internally on a response, distrusts two key datasets guiding its decisions, and operates downstream of a deficit no one intends to address. Precious metals have absorbed the blow of hawkish repricing—the short-term arithmetic of higher expected policy rates on a zero-yield asset. The longer-term question is the one Bullard himself raised: if gold prices are an ongoing scorecard of market confidence in the central bank, and those being graded are watching the score, then the next calendar meeting matters far less than what gold's report card reads a year from now.