Jerome Powell at Jackson Hole, Wyoming, August 24, 2018.
David A. Grogan | CNBC
Fed Chairman Jerome Powell faces the tough challenge of presenting a unified vote on Fed policy from the most shared Fed this year, and it could create volatility if he does not assure markets the Fed will continue to cut interest rates.  Powell speaks at the Fed's annual Jackson Hole symposium at 10 a.m. Friday morning to an audience of central bankers and economists. His speech comes as Fed and Powell are under unprecedented siege by an angry president and also lose confidence in terrible markets.
"He has a little tough bonding. His committee is divided. He is under a lot of pressure from the president, and most importantly, American data has been relatively resilient, and it doesn't give him a huge amount of reason for meaningful ease, "said Mark Cabana, head of US short-term strategy at Bank of America Merrill Lynch.
As of Thursday morning, futures futures priced at more than 90% odds for a 25 basis point cut at the September meeting, and between one and two additional quarter-point cuts between then and the end of the year.
"I think Powell is going to try to tread the needle on how the committee looks at the prospect," Cabana said. "He might sound more rude, marginally more concerned, but I don't think he's going to feel comfortable committing to ease, and that's what the market wants to hear. I think the risk is that the Fed may disappoint."
Economists say the Fed is divided between those who need to see evidence that the US economy is eroding and those who want to protect it from headwinds that come from weakness elsewhere in the world. According to the Fed's minutes of its July meeting, two members wanted the Fed to cut interest rates by 50 basis points; two dissents who did not want a cut at all, and a few other members who did not vote, and who also did not want the Fed to take action.
"They hold to the view that the economy needs to burst before they want to ease. I think it is wrong vision," said Michael Gapen, chief economist at Barclays. Those opposed to an interest rate cut "seem less willing to accept the argument that if they do not ease it, they will be tighter," he said.
Philadelphia Fed President Patrick Harker told CNBC Thursday that he did not see the need for another cut. While Harker is not a voting member, his commentary on negative market sentiment and concerns left the Fed would not act aggressively enough to prevent the economy from falling into recession.
Adding the negative sentiment on Thursday was a report that showed the manufacturing sector contracting for the first time in the US since the financial crisis. Production data for Markit PMI fell to 49.9. Below 50 marks decreasing activity.
"The rest of the world looks shaky. If we do nothing, the dollar will probably appreciate and we will import austerity," Gapen said.
Gapen said that the Fed's meeting minutes confirmed the split in the Fed that was already well known. "There were probably five or six who would not move, and I would set that as Harker, [Atanta Fed President Raphael] Bostic, [Richmond Fed President Tom] Barkin, [St. Louis Fed President Esther] George, [Dallas Fed President Rob] Kaplan, and [Cleveland Fed President Loretta] Master," he said.
Strategists said that the more disagreement with the Fed, the more uncertain markets are about politics, and now the markets are convinced that the Fed cannot cope with a recession. As a result, the widely observed yield curve of 2 to 1
"He just has to make sure everyone else who wants to ease will vote with him," Gapen said. "The market is of the opinion that the rest of the world looks terribly shaky. They think politics must ease in the US and globally … For what reason they think the Fed is limited, either by their internal divide or by politics against it." 19659002] Powell has said that the Fed will behave appropriately in the face of global weakness, worries about the trade war and stubbornly low inflation, ahead of the Fed's quarterly rate in July. But his comments after the July meeting that the Fed made a "mid-cycle adjustment" or an insurance cut to fend off weakness shook up markets that have been looking for a more aggressive Fed rate cut.
"If & # 39; center alignment & # 39; is not in the Jackson Hole speech, people will interpret it as opening the door for more cuts, as opposed to just two or three," said Gapen, who expects another three cuts by the end of the year.
Economists also expect Powell to discuss low inflation and a proposal to allow inflation to move in a wider range on both sides of the 2% inflation target.
John Briggs, Natwest Markets strategy manager, said Powell should point to the three things the Fed said was behind its cut in July when it released the minutes of the meeting.
Powell should mention "the business world; the risk management perspective given the global outlook and outlook for inflation, and talk about how they are still awake by the risk, and they will respond as needed," Briggs said.
Powell could again create volatility when he talks. "He comes out and is hawkish and chlorine," Briggs said. The market reacted after the Fed's last meeting because the Fed issued a rude statement, Briggs said, and then held a hawkish press conference.
Powell is expected to try to sound balanced in keeping options open, while emphasizing that he is ready to cut interest rates if the US economy weakens, and also as a preventive measure.
– The risk is that Jay Powell ends disappointing markets by not committing enough to a rate cut in September because he can't commit, says Diane Swonk, chief economist at Grant Thornton. & # 39; The domestic economy is showing some improvement. We have seen strong consumers, still weak production activity, still weak investments. That has been the dilemma we are in. … The divide is between the traditionalists who want to live in their own orbit, which is domestically oriented. They will not be a global Fed. They do not want to be on the global highway. "
Powell can give the look some tranquility when glancing at cameras at Jackson Hole. But in truth, Gapen said last time the Fed had so much internal dissent in 2011 when former Fed chairman Ben Bernanke promoted a long period of low prices and unorthodox relief during the financial crisis. At that time, three members disliked.
Fed viewers say it's hard to tell how much disharmony there was on former Fed boards because the Fed was less transparent in the past, and other Fed chairs Cabana said former Fed leader Janet Yellen faced two dissents in December 2017, a meeting in which the Fed raised its rates.
Gapen said the former political pressure against the Fed was from Congress, especially when it questioned the Fed's growing balance, but now the Fed and Powell are facing personal, growing attacks from President Donald Trump who believe the Fed has been too slow to cut interest rates.
makes Powell's job even more difficult, and the Fed chairman has made it clear that he views the Fed as independent and that he will not resign or leave until his term is up.  "It is difficult to paint a picture of a consensus when there is no consensus," Swonk said. "Consensus is very fragile."