Jerome Powell, the beleaguered chairman of the Federal Reserve, managed to herd a divided committee into backing a quarter-point rate cut, the first of the year, all while ignoring the deafening political drumbeat from the White House demanding deeper, faster cuts. In other words, Powell bought himself a fragile consensus in a house increasingly on fire.
The cut to 4%–4.25% was backed 11–1, the sole dissent from Trump loyalist Stephen Miran, who predictably wanted more. Even erstwhile hawks Christopher Waller and Michelle Bowman fell into line. A rare moment of unity, perhaps, but hardly a cure for the deeper malaise. The Fed’s new dot plot shows widening divisions: some see more cuts this year, others want none, and one policymaker even pencilled in another 125 basis points of easing by December.
Powell admitted, with his trademark lawyerly vagueness, that there is now “no risk-free path.” Translation: the Fed is cornered. Inflation remains sticky, tariffs are fuelling more of it, and the jobs market, once Powell’s alibi, is visibly cracking. The two mandates, employment and inflation, are now pulling in opposite directions, and the Fed looks increasingly like a trapeze artist wobbling without a net.
Political distractions only sharpened the circus atmosphere. Miran, freshly sworn in after a fast-tracked Senate confirmation and still technically on Trump’s White House payroll, wasted no time pressing for bigger cuts. Lisa Cook, meanwhile, had to lawyer her way back into the room after Trump’s botched attempt to oust her. And Powell, under constant questioning, could do little more than repeat the mantra that the Fed’s independence was “firmly intact.”
No one believes him, of course. The White House is openly shopping for Powell’s replacement once his term ends in May, and Miran’s presence serves as a daily reminder of what “independence” looks like when your governors moonlight as presidential staffers.
The Fed’s “insurance” cut came with rosier forecasts for growth and employment, a contradiction so glaring it might almost be mistaken for strategy. The truth: Powell is fighting a rearguard action, hoping to preserve a shred of credibility for the institution before Trump’s wrecking ball of political appointments reduces it to a campaign prop.
Pressed about the mounting threats, Powell did his best schoolmaster impression: “We are firmly committed to our independence.” The line was delivered with the kind of solemnity that usually precedes a surrender.
For now, Powell can point to the 11–1 vote as proof that he has kept the family quarrel contained. But with Miran already tugging the committee in Trump’s direction and the White House itching to crown a pliant successor, unity looks as temporary as Powell’s own tenure.
One leader tweets, another builds pipelines; in Washington, the Fed chair clings to “independence” by a thread.
The reality is that the picture is even murkier than it looks. The Fed cut rates because the labour market is wobbling, yet in the same breath it warns that inflation could well push higher. The dot-plot adds to the farce, offering a set of contradictory signals that make the future policy path almost unreadable. Meanwhile, markets are betting on far deeper cuts than the Fed itself is projecting, a disconnect that sets up a nasty upside risk for yields if either growth or inflation refuses to play along. And layered on top of all this, the White House is running what looks suspiciously like a hostile takeover attempt of the central bank. Put it together, and you don’t get a coherent strategy; you get the perfect recipe for disaster.