Powell’s Rate Cut Gambit: Economy’s Fate Hangs in Balance?

by

Fed Chair Powell warns of labor market weakness after first rate cut in 9 months as markets price more easing and crypto swings. 🧠💸

 

Federal Reserve Chair Jerome Powell, ever the maestro of monetary mystique, has once again taken to the podium to assure us that the central bank is “paying attention” to the job market-though one might wonder if they’ve been distracted by the latest episode of “The Office.” 🎭

Speaking at the Greater Providence Chamber of Commerce in Rhode Island, he said that the pace of US economic growth has slowed, while unemployment has started to edge higher. A revelation so profound, it’s as if he’d just discovered gravity. 🌍

Job creation, he added, is showing signs of weakness. The remarks came shortly after the Fed lowered interest rates by 25 basis points. A move so dramatic, it’s like watching a soap opera with a 10-minute delay. 📺

Markets Brace for More Rate Cuts

The Federal Open Market Committee’s decision has changed the market expectations. Fed funds futures now point to high probabilities of further cuts in October and December. Powell himself avoided making commitments about upcoming meetings but admitted there is no “risk-free path” for interest rates. A statement so vague, it could be a Yelp review for a haunted house. 🕯️

Jerome Powell: “Core PCE prices rose 2.9%. Higher than the year ago level. Goods prices are driving the pickup inflation. Incoming data suggest that those price increases largely reflect higher tariffs.”

– Spencer Hakimian (@SpencerHakimian)

Cutting too much could kickstart inflation, while staying tight for too long risks pushing unemployment higher. A balancing act so precarious, it’s like walking a tightrope made of glitter and existential dread. 💫

DBS Bank in Singapore described the Fed’s recent meeting as filled with “dissonance and contradictions.” The bank pointed to inconsistencies between economic projections and Powell’s tone, noting that policymakers predict stronger GDP and lower unemployment while also stressing rising employment risks. A performance so contradictory, it’s a miracle they didn’t need a script. 🎭

This uncertainty has kept investors on edge, and Wall Street is now pricing in the likelihood of two more reductions before the end of this year. A market so fickle, it’s like a teenager’s mood swings. 😅

Bitcoin and Crypto React to Fed’s Signals

Financial markets tend to welcome monetary easing. However, Bitcoin and the wider crypto sector responded differently this time. A reaction so polarizing, it’s like a breakup after a Tinder date. 💔

While equities have rallied on expectations of looser policy, Bitcoin slipped below 113,000 dollars after Powell’s speech. A drop so dramatic, it’s as if the crypto world just found out their parents are divorcing. 💸

Analysts noted a widening gap between Bitcoin’s performance and major stock indices like the Nasdaq. The Kobeissi Letter flagged this divergence and indicated that such splits between assets rarely persist for long. A warning so cryptic, it’s like a fortune cookie with a PhD. 🧠

Market analyst Heisenberg also noted that Bitcoin’s price tends to realign with equities over time. This could hint at a rebound if stock markets remain strong. A prediction so obvious, it’s like saying water is wet. 🌊

Despite the near-term weakness, institutional appetite for crypto is holding steady. CoinShares reported that Bitcoin exchange-traded funds saw $977 million in inflows last week, and have brought the total crypto inflows to 1.9 billion. A testament to the resilience of investors who’ve clearly never heard of the phrase “don’t put all your eggs in one basket.” 🥚

This indicates that large investors continue to see digital assets as an attractive allocation, even as short-term volatility weighs on prices. A gamble so bold, it’s like betting on a horse with a broken leg. 🐎

Inflation Is Still an Issue

Powell addressed inflation directly, noting that while recent readings are still high, some pressures appear temporary. He pointed to tariffs and noted that they will likely cause only a “one-time pass-through” effect on prices rather than persistent inflation. A statement so reassuring, it’s like telling a child there’s no boogeyman under the bed. 👶

NOW: Fed Chair Jerome Powell said tariffs are not a major driver of U.S. inflation.

THIS IS HUGE!!!

– Nathan Jeffay (@NathanOnCrypto)

This marks a slight shift from earlier Fed warnings that tariffs could create more lasting cost increases. A U-turn so sudden, it’s like a car swerving to avoid a pothole-and missing by inches. 🚗

Still, other Fed members are wary. Officials like Raphael Bostic and Alberto Musalem continue to flag inflation risks, while Stephen Miran has argued for deeper cuts to support employment. A debate so heated, it’s like a family dinner with political disagreements. 🍽️

This divide shows the challenge of setting policy when inflation and jobs move in opposite directions. A conundrum so complex, it’s like solving a Rubik’s Cube while blindfolded and juggling. 🧩

Read More

2025-09-25 13:29