Powell’s Speech: Are We Getting Two More Rate Cuts or Just Hot Air?

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Ah, dear old Jerome Powell is about to grace us with his wisdom once again. On Tuesday, the esteemed Chairman of the Federal Reserve will regale the good folks at the National Associations for Business Economics (NABE) Annual Meeting in Philadelphia with his thoughts on the Economic Outlook and Monetary Policy. One wonders, will he sprinkle the speech with enough rate cut chatter to send the US Dollar (USD) into a tailspin, or will it be a masterclass in avoiding controversy? The excitement is palpable! 💼

Now, as it happens, the US government shutdown has managed to keep the usual flurry of data releases on ice, leaving Powell with the delightful responsibility of shaping market expectations all by his lonesome. The plot thickens, doesn’t it? 😏

Despite a symphony of mixed signals from Fed officials recently, the CME FedWatch Tool-bless its predictive little heart-has the markets practically betting their lunch money on a 25 basis-point (bps) rate cut in October. What’s more, there’s a nearly 90% chance of another 25 bps reduction in December. Wouldn’t you know it, the market has spoken, and it’s feeling bullish about rate cuts! 📉

Of course, we mustn’t forget the Fed Governors. Michael Barr, ever the skeptic, seems to think that the Fed’s ability to ‘look through’ tariff-driven inflation might be a tad optimistic. He’s raised the alarm bells over the inflation goal’s lofty ambitions. Meanwhile, St. Louis Fed President Alberto Musalem has warned that if inflation expectations go off the rails, short-term labor market fluctuations will look like child’s play. 🛑

On the lighter side of things, San Francisco Fed President Mary Daly seems less concerned about the grand inflation conspiracy. She’s noted that inflation has been far more well-behaved than expected, though she’s still fretting about a softening labor market. She’s clearly the glass-half-full type, isn’t she? 🥂

Meanwhile, Philadelphia Fed President Anna Paulson, in her debut public speech, has assured us that tariffs won’t bring sustained inflation-thank goodness for that!-but, as always, there’s a caveat: labor market risks are on the rise. Never a dull moment, folks! 🧐

Should Powell decide to keep the rate-cut party going, with an eye on a labor market that seems to be losing its grip, the USD might struggle to keep its head above water. It’s all rather like watching a car trying to drive uphill with the brakes on. However, the market is not entirely convinced there’s much room for the USD to fall further, even if December’s rate cut is a done deal. The plot, as they say, thickens! 🏦

But fear not, dear reader! If Powell plays it cautiously, perhaps emphasizing the uncertainty due to the lack of critical inflation and employment data, and throwing in a nod to the US-China trade conflict for good measure, the USD might yet find some legs to stand on. We shall see, won’t we? ⚖️

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2025-10-14 15:54