{"id":15486,"date":"2025-09-17T21:45:26","date_gmt":"2025-09-17T19:45:26","guid":{"rendered":"https:\/\/kaizen-blog.org\/?p=15486"},"modified":"2025-09-17T21:58:33","modified_gmt":"2025-09-17T19:58:33","slug":"ein-viertelpunkt-zwei-fronten-wie-powell-unter-trump-druck-senkt-und-gegen-die-inflation-ankaempft","status":"publish","type":"post","link":"https:\/\/kaizen-blog.org\/en\/ein-viertelpunkt-zwei-fronten-wie-powell-unter-trump-druck-senkt-und-gegen-die-inflation-ankaempft\/","title":{"rendered":"A Quarter Point, Two Fronts - How Powell Cuts Under Trump Pressure and Fights Inflation"},"content":{"rendered":"

A quarter point is small on paper and large in politics. The Federal Reserve has cut the key interest rate by 25 basis points - new range 4.00 to 4.25%, the first cut since December. At the same time it signaled two further steps later this year. Not as a promise, but as a path: By December the band could be at 3.50 to 3.75%. This move is more than routine - it is the response to an economy with 2.9% inflation in August (driven up by Trump\u2019s tariffs) and a labor market that suddenly looks more fragile than the 4.3% unemployment rate would suggest.<\/p>\n\n\n\n

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Jerome Powell<\/mark><\/strong><\/figcaption><\/figure>\n\n\n\n
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Powell calls it \u201ca challenging situation\u201d and speaks openly of the \u201cno risk-free path\u201d: Normally the rule is - weak jobs, low inflation; strong jobs, higher inflation. Now the double threat looms: price pressure remains while job creation almost stops (29,000 in the three-month average through August, in May it was still about 130,000). Accordingly, the FOMC has adjusted its diagnosis: The \u201cdownside risks to employment have increased.\u201d At the same time it states that core inflation (excluding energy\/food) is expected at 3.1% by year end, 2.6% in 2026, and only in 2028 will the 2% mark be reached again. The neutral rate remains anchored in the projections at 3%, growth for 2025 at 1.6%, unemployment projected at 4.5%. Those who think the meeting was technocratic misunderstand its political weight. Donald Trump has been pushing for massive easing for weeks - \u201cthree full percentage points.\u201d Just before the session started Stephen Miran was sworn in, freshly confirmed by the Senate, officially only \u201con leave\u201d from his role as CEA chief. And promptly Miran voted for the half-point - the hardest dissent at the table. The dot plot shows the extremes: a \u201csoft dissent\u201d that wanted no cut in 2025 (stay at 4.25-4.50%), and at the other end a projection track toward 2.75-3.00% by year end - likely Miran\u2019s line. This is no academic difference, this is power politics in the engine room of monetary order.<\/p>\n\n\n\n

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Lisa Cook<\/mark><\/strong><\/figcaption><\/figure>\n\n\n\n
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In parallel the unprecedented attempt is underway to dismiss Fed Governor Lisa Cook - the first in 112 years. An appeals court halted the step 2:1 for now, the White House wants to go to the Supreme Court. Treasury Secretary Bessent calls for an \u201cindependent review\u201d of the Fed, Powell refuses to comment and instead repeats his mantra: \u201cEverything we do is in service to our public mission,\u201d \u201cmeeting by meeting,\u201d \u201cdeep in our culture is to look only at data and never at political outcomes.\u201d In times when tariffs distort prices and the executive branch chips away at independence, even this sobriety becomes a defense of institutions.<\/p>\n\n\n\n

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On the markets the new narrative shows immediately - not in a bang, but in a gradient. The Dow rises about 0.6% (+290 points), small caps in the Russell 2000 gain about 1% because cheaper money reduces their balance sheet risks. The Nasdaq falls about 0.9%: Nvidia -3.2%, Broadcom -4.7% - a reality check for expensive AI stories in an environment of only slowly declining interest rates. The S&P 500 stagnates at -0.3%, while the 10-year Treasury slips to 3.99% - a quiet vote of confidence in Powell\u2019s path. Individual names paint the micro story: Lyft +11.9% (robotaxi story), Workday +6.9% (activist entry), RCI Hospitality -8.7% (AG lawsuit). StubHub prices its IPO at $23.50 and fluctuates.<\/p>\n\n\n\n

The global perspective sets the contrasts: The ECB remains unchanged; the BoE is expected to hold - with British inflation at 3.8% there is no room to go down. Japan\u2019s exports to the US fell in August by -13.8% year over year - tariffs are felt not only in US store shelves but in Asian factories. In this world the dollar remains gravity: Every Fed step shifts capital flows, rebalances emerging markets in dollars and steers commodity prices. The Fed cuts - and the world recalculates. The core question remains: Is that enough - economically and institutionally? Powell himself says 25 bp alone \u201cdoesn\u2019t make a big difference,\u201d what matters is the path. That is exactly what this is about: not about the heroics of the single cut, but about credibility in holding course under political pressure. Trump wants cheap money to cover the costs of his tariff inflation - and he is openly pressuring the Fed to deliver. The central bank\u2019s answer is: small doses, steady nerves, data before dogma.<\/p>\n\n\n\n

For households this means: mortgages react gradually (much is priced in), auto loans remain tough, credit cards at about 20% continue to hurt; savers must reckon with declining 4%-plus yields on high-yield accounts and CDs. For companies: refinancing will gradually get easier, but no \u201call clear.\u201d For democracy: what matters is whether the Fed still keeps its hand steady when the pressure rises further. This quarter point is no fireworks. It is a test - whether America\u2019s monetary policy can manage the balancing act between 2.9% inflation and a soft labor market without giving in to politics. Today it matters less how far rates fall by December. What counts is whether the last cut is still recognizable as its own decision.<\/p>\n\n\n\n

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