Powell and the Put: The Fed's Tightrope

Jerome Powell is balancing political caution with market concerns amid the Federal Reserve's monetary policy decisions. After two consecutive rate cuts, the Fed is cautious about continuing monetary easing, reflecting internal divisions and rising political stakes one year before the US presidential election.

Mixed Messages from Powell

During his October 29 press conference, Powell delivered a nuanced message. He recognized positive signs of ongoing disinflation, noting a consumption deflator “around 2.3 to 2.4%.” However, he also tempered expectations for further easing in December, describing the US economy as “modestly restrictive.” This wording aims to reassure that the Fed remains in control while preventing market overreactions.

Internal Fed Tensions and Political Influence

Powell’s cautious stance is shaped both by economic data and political circumstances. Inside the Federal Reserve's committee, debates run deep:

Jeffrey Schmid, President of the Kansas City Fed, opposes additional rate cuts.
Stephen Miran, aligned with the Trump administration, supports more substantial easing.

Meanwhile, the upcoming presidential campaign intensifies concerns about the Fed's independence.

François-Xavier Chauchat, of Dorval Asset Management, explains, “Monetary policy remains somewhat restrictive but retains the potential to ease: it's an almost ideal environment for the markets.”

Author's summary: Jerome Powell navigates a delicate balance between economic realities and political pressures, reflecting the Fed's cautious approach amid market uncertainty and election-year tensions.

Idéal Investisseur — 2025-11-05