Powell and the Put: The Fed's Tightrope

Monetary Policy Under Electoral Scrutiny

During his press conference on October 29, Jerome Powell delivered a mixed message. On one hand, he acknowledged the positive signs of ongoing disinflation, citing a consumption deflator « around 2.3 to 2.4%. » On the other hand, he tempered expectations for further easing in December. He stated that the US economy remains « modestly restrictive, » a way to signal that the Fed remains in control while avoiding market overreaction.
Powell's caution is driven as much by the numbers as by the political context. Internal debates within the monetary committee are intense: Jeffrey Schmid, President of the Kansas City Fed, opposed any further rate cuts, while Stephen Miran, close to the Trump administration, advocates for more pronounced easing. In the background, the US presidential campaign is reigniting tensions over the Central Bank's independence.
François-Xavier Chauchat, a member of the investment committee at Dorval Asset Management, states, « Monetary policy remains somewhat restrictive but retains the potential to ease: it's an almost ideal environment for the markets. » In other words, the Fed's famous put—its ability to intervene in the event of market turbulence—remains present, even if it is becoming more political than technical.

Between Disinflation and the Risk of Reignition

Recent data supports the scenario of a calming economy. Rents are slowing down, the labor market is showing signs of weakening, and companies are moderating the increase in their sales prices. According to S&P Global, American manufacturers no longer have the same pricing power, constrained by weaker demand and increased competition. Even private sector employment declined in September according to the ADP survey, confirming the trend towards wage disinflation.
However, this fragile balance remains threatened. If the labor market strengthens and the tariffs imposed by Donald Trump continue to drive up import costs, the decline in interest rates could halt sooner than anticipated. In this context, the Fed is walking a tightrope: aiming not to stifle growth while avoiding reigniting inflation.
Powell is aware that every word spoken now serves as both a political and economic signal. As 2026 approaches, investors are less focused on the next monetary decision than on Wall Street's reaction. For the moment, the Fed put remains intact, but the tightrope walker is advancing on an increasingly taut wire.

Between Disinflation and Risks of Rebound

Recent data supports the scenario of a calming economy. Rents are slowing down, the labor market is showing signs of fatigue, and companies are moderating the increase of their selling prices. According to S&P Global, US manufacturers no longer hold the same pricing power, constrained by weaker demand and increased competition. Even private employment declined in September according to the ADP survey, confirming the trend toward wage disinflation.
However, this fragile balance remains threatened. If the labor market strengthens and tariffs imposed by Donald Trump continue to drive up import costs, the drop in rates could halt sooner than expected. In this context, the Fed is navigating on a ridge: aiming not to hinder growth without reigniting inflation.
Powell knows this: every word spoken is now as much a political signal as an economic one. Approaching 2026, investors are less focused on the next monetary decision and more on Wall Street's reaction. For now, the Fed put remains intact, but the tightrope walker is advancing on an increasingly taut line.