FederalReserve

Confidence in Federal Reserve Chair Jerome Powell has taken a serious hit. Just one disappointing U.S. employment report was enough to dismantle the illusion of a “resilient labor market” that Powell had defended earlier this week. Markets reacted immediately, and a September interest rate cut is once again on the table — now with a much higher probability than before.
According to the newly released data, the U.S. economy added just 73,000 nonfarm payroll jobs in July. That’s far below the 110,000 expected by analysts. What’s more, there were massive revisions to previous months’ figures. June’s number was slashed from 147,000 to only 14,000. May’s data dropped from 144,000 to 19,000. In total, 258,000 jobs disappeared from the last two months' statistics — roughly equivalent to the entire population of Scottsdale, Arizona.
Meanwhile, the unemployment rate quietly rose to 4.2%. Although that matched expectations, it was still higher than the previous month, putting a serious dent in the narrative that the Fed had pushed just days ago. Powell’s statement that the labor market was “still strong” didn’t even survive a full media cycle before being discredited by the cold reality of the numbers.

Markets Flip: Rate Cut Seen as a Done Deal
The market’s response was swift. The CME FedWatch Tool showed that the probability of a rate cut in September jumped to 75.5%, up from just 40% a day earlier. Prediction platform Kalshi echoed this sentiment, giving a 75% chance that Powell and his team will lower interest rates at the next FOMC meeting.
The bond market also responded sharply. The two-year U.S. Treasury yield dropped by 15 basis points to 3.80%, while the ten-year yield fell by 8 basis points. For many investors, the message was clear — a policy pivot is rapidly approaching.

Trump Blasts Powell: “Too Late. Cut Rates Now!”
As expected, Donald Trump wasted no time in attacking the Fed Chair. On his Truth Social platform, he called Powell “a disaster” and demanded an immediate rate cut.
“Too little, too late. Jerome ‘Too Late’ Powell is a disaster. CUT RATES! The good news is, tariffs are bringing billions into the USA!”
So what do today’s numbers really mean? At this point, there are only two plausible interpretations. Either the U.S. labor market is genuinely sliding into recession, or the Bureau of Labor Statistics data is so flawed that a quarter of a million jobs have simply vanished in two months. Neither scenario is encouraging. The first suggests real economic trouble. The second suggests that nobody actually knows what’s going on in the economy.
In either case, a September rate cut is no longer a “maybe.” The market is now pricing it in as almost certain.

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🏦 Policy Decision
The Federal Open Market Committee voted 9–2 to keep its benchmark federal funds rate at 4.25%–4.50%, marking the fifth straight time rates were held steady.
❌ Rare Dissent
Notably, Governors Michelle Bowman and Christopher Waller dissented, both advocating for a 25‑basis‑point cut — a rare divergence within the FOMC and the first time two governors dissented since 1993.
📉 Economic Context & Rationale
The Fed cited moderating economic growth, a still-strong labor market, and inflation slightly above the 2% target (about 2.7% in June) as reasons to maintain a “moderately restrictive” policy stance. Chair Powell emphasized uncertainty about the effects of new tariffs and affirmed the Fed’s data-driven approach, resisting political pressure from President Trump to lower rates.
📉 Market & Outlook
Markets responded with modest movements: the dollar strengthened, Treasury yields rose slightly, and equity indexes edged lower. Analysts now see a possible rate cut in September, contingent on incoming data, expecting a total of 0.25% to 0.75% easing by year‑end if economic conditions soften.
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📝 Why It Matters
Fed independence: Chair Powell’s stance reinforces the central bank’s autonomy from political pressure.
Dissent signals shift: Multiple dissenters hint at a potential policy pivot.
Data over drama: The Fed continues to prioritize facts over politics in decision-making.
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📅 What to Watch Next
Upcoming inflation and labor data ahead of the September 16–17 meeting will likely influence any future policy shift.
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🏛️As the Federal Reserve prepares to announce its latest interest rate decision, U.S. Treasury Secretary Mr Scott Bessent has publicly stated that he does not anticipate a rate cut at this time. Speaking ahead of the decision, Bessent emphasized the need for the FED to be more open and imaginative in its policymaking approach.

📈📉Current Economic Indicators:

- Federal Interest Rate: Currently at 4.25%–4.5%, unchanged since December 2024.

- Inflation: June's inflation rate stands at 2.7%, up from 2.3% in April, influenced by recent tariff implementations.

- GDP Growth: The U.S. economy grew by 3% in the second quarter, rebounding from a 0.5% contraction in the first quarter.

📊Market Reactions:

Investors are closely monitoring the FED's decision. The S&P 500 has seen a modest increase of 0.2%, while the NASDAQ rose by 0.4%. Treasury yields have also experienced slight upticks, reflecting market anticipation.

💱💲Implications for Investors:

✅- Interest Rate Stability: A decision to maintain current rates may signal the Fed's cautious approach amid mixed economic signals.

✅- Market Volatility: Investors should be prepared for potential market fluctuations following the Fed's announcement.

✅- Investment Strategies: Diversifying portfolios and staying informed on economic indicators remain crucial.

🔍Final Take:

Secretary Bessent's call for the FED to "show some imagination" underscores the complexities facing monetary policymakers. As the FED balances economic data with political pressures, investors are advised to stay vigilant and adaptable in their strategies.

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