Powell Dropped A Reality Check:

the Fed’s playbook has changed — and so have the risks.

Key points

Jobs look OK — but fragile. On the surface employment is stable, yet cracks (like collapsing immigration) make the labour market brittle. If demand softens, unemployment could rise quickly.

Inflation isn’t gone. Tariffs are nudging prices up. The big danger is policy error — tighten too hard or loosen too soon and you can get a second round of inflation.

Policy regime shift. The old “AIT” (average inflation targeting) fit a low-inflation, low-rate world (2020). Today’s reality is higher inflation and higher rates (2025). The Fed has moved back toward flexible, data-dependent inflation targeting.

What to expect next.

Rate hikes: likely over for now.

Rate cuts: only if incoming data clearly deteriorates.

Tariffs: treated as a one-off shock — not an automatic trigger for action.

Structural drag: lower labour supply → lower potential growth and a higher long-run neutral rate (r).

Market implications.

Bonds: Yields probably won’t explode higher, but the age of ultra-low rates is gone.

Stocks: Consumer slowdown + tariff pressure = tougher earnings outlook.

USD & Bitcoin: Dollar may stay strong short-term; if jobs suddenly weaken, markets will pivot to cut expectations — that liquidity shift is often bullish for Bitcoin.

Bottom line (one line): The Fed is balancing on a knife-edge — policy mistakes are the main risk; when the macro tide finally turns, the biggest breakout trade could be Bitcoin as liquidity flows shift.

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