Powell and the Federal Reserve he leads are at a crossroads in economic decision-making, where each choice could lead to entirely different outcomes. How the Federal Reserve will choose in the future and how Powell will resolve this epic dilemma is being closely watched by the global economic market.
In this context, the Federal Reserve's monetary policy choices become exceptionally difficult. Former Federal Reserve officials pointed out that if interest rates are cut too early, it may stimulate employment to some extent and encourage companies to expand production and hiring, but it may also lead to uncontrolled inflation expectations. Once the public and businesses form inflation expectations, they will rush to buy goods and demand salary increases, further driving up prices and creating a vicious cycle. On the other hand, if interest rates continue to rise, although it can curb inflation, it may provoke turbulence in the financial market. The stock market may plummet, bond yields may soar, and many companies' financing costs will rise significantly, potentially leading to a breakdown in the funding chain of some companies, causing financial panic and further impacting the real economy.
The weak trend in the job market is also not optimistic. The labor market shows signs of cooling, with reduced job vacancies, small businesses reporting slower sales, and decreased hiring intentions, indicating that the job market is facing severe challenges. Employment is the foundation of people's livelihoods; a large number of people being unemployed or unable to find work will not only affect individual quality of life but could also trigger a series of social problems, such as widening wealth gaps and intensified social conflicts.
The Federal Reserve bears the dual mission of promoting full employment and maintaining price stability, and at this moment, these two missions are in intense conflict, putting the Federal Reserve in a dilemma. Looking back in history, the last time the Federal Reserve faced a similar situation regarding raising tariffs was in the 1930s when the Smoot-Hawley Act was passed. However, the economy was still recovering from the Great Depression at that time, with no significant inflationary pressures, which is fundamentally different from the current economic situation.
On the global economic chessboard, every decision made by the Federal Reserve is crucial. On July 14, 2025, news broke that Federal Reserve Chairman Powell was in an extremely tricky situation, with the dual pressures of inflation and a weak job market weighing heavily on his shoulders.
First, looking at inflation, if there are no more TCOs after August 1, corporate profit margins will be further squeezed. To maintain operations, companies are likely to gradually raise prices, which will undoubtedly create a risk of delayed inflation. Once inflation reignites, the cost of living for the public will rise significantly, and the stability of the socio-economy will also be impacted. Historical economic data shows that every time inflation spirals out of control, it is accompanied by soaring prices, currency devaluation, and a sharp decline in purchasing power, leading the entire economic system into chaos.
