The Federal Reserve (FED) Mouthpiece: Powell's Last Stand, How to Bear the Thorny Economic and Political Pressures

The Federal Reserve unexpectedly lowered the interest rate by 25 basis points in September, with Powell seeking a rare soft landing amid economic slowdown and political pressure. The market is focusing on its independence and subsequent path (Background: The Federal Reserve's FOMC cut rates by 1 basis point in September, Powell stated that "tariff impacts are limited," and Bitcoin surged past 117300) (Additional context: CoinDesk reports that if the Federal Reserve cuts rates by 1 basis point, Bitcoin will regain its upward momentum; Matrixport indicates that the market leverage levels show limited downside potential for BTC). Federal Reserve Chairman Powell announced today (18th) that the benchmark interest rate will be lowered by 25 basis points, ranging between 4%–4.25%. This is the first rate cut this year and also the most notable decision in the latter part of his term. Nick Timiraos, a spokesperson for the Federal Reserve, pointed out that Powell is trying to defend the independence of the Central Bank and strive for an economic "soft landing" amid economic slowdown, stubborn inflation, and immense political pressure from the White House. The economic and political tug-of-war behind the rate cut This action is labeled as a "preventive" adjustment, but the real motivation is the obvious slowdown in employment growth and persistent high inflation. Over the past three months, the average job growth was only 29,000, far below the 150,000 in early June; at the same time, the Trump administration's tariff increases have raised import costs, delaying the retreat of price pressures. The author analyzes that Powell faces the dilemma of "weak growth, high inflation": cutting rates too aggressively could fuel inflation, while insufficient action might fail to resist recession. The political aspect is similarly tense. The Trump administration publicly demands more substantial easing, with new board member Stephen Miran being the only dissenter in the meeting, advocating for a half-point cut and estimating that interest rates should be below 3% by the end of the year. The author points out that this indicates pressure from the executive branch has reached the voting committee, testing whether the Central Bank's decisions still rely on data. The American-German Academy review states that the independence of the Central Bank is facing the most severe challenge in recent years. Warnings from historical experience The CFA Institute compiled data showing that since the 1970s, there have been about 11 instances of "mid-cycle easing," with only 2 to 3 successfully avoiding recession. The year 1995 is often seen as a golden example, but the rate cuts in 1967, 1990, 2001, and 2007 did not prevent economic decline. The author reminds that if Powell cuts rates too deeply, it may repeat the prolonged high inflation of the 1970s; if the action is too small, it risks replicating the hesitance before the subprime mortgage crisis, losing time to take action at the onset of recession. Risks also arise from the interaction between tariffs and employment. Rising import costs may push up production-side prices while compressing corporate hiring willingness; if the job market further weakens, consumer spending will simultaneously cool, making it even harder for the Federal Reserve to balance between controlling inflation and supporting demand. The soft landing gamble on a tightrope Despite a stagnant housing market and cooling employment, the stock market remains strong due to the fervor of AI infrastructure investments and corporate profit resilience, with some investors still confident in a soft landing. Powell stated in the post-meeting press conference: "There is no risk-free path; we will respond to data in each successive meeting." Blake Gwinn of RBC Capital Markets believes that the seemingly "chaotic" signals actually reflect the uncertainty of the information itself; former Bank of America chief economist Ethan Harris also warned that public concerns about inflation remain high, and "political temperature" cannot be ignored. According to the Federal Reserve's post-meeting statement, most committee members predict that there will be two to three more rate cuts before the end of the year, with a terminal range of about 3.5%–3.75%. The author interprets that the "successive meeting" strategy means that decisions will closely track short-term data rather than preset paths, in order to maintain policy flexibility and reduce concerns of political entrapment. Nick Timiraos concludes that this 25 basis point rate cut is not only a response to economic data but also a test of the Federal Reserve's reputation and institutional independence. If Powell can lead the economy to a stable slowdown, he will inscribe a rare success in the annals of the Central Bank; if he fails, the United States may face an economic recession, and the credibility and policy space of the Federal Reserve will suffer long-term erosion. The upcoming months' employment, inflation, and consumption indicators will determine the final direction of this "coin upright" operation. Related reports: A review of the Federal Reserve's rate cut cycle: What are the next steps for Bitcoin, U.S. stocks, and gold? Powell's rate cut this week is not surprising; the "dot plot" is the real powder keg of the Federal Reserve. The market celebrates the September rate cut as a "hidden crisis"; Powell's speech is not as dovish as it appears. This article was first published by BlockTempo, the most influential blockchain news media.