The
“labor
over
inflation”
model?

The
markets
are
currently
reflecting
expectations
for
potential
rate
cuts,
even
in
light
of
recent
improvements
in
inflation
data,
cooling
rent
growth
and
declining
oil
prices.
However,
the
Federal
Reserve
has
adjusted
its
inflation
targets,
primarily
in
response
to
the

trade
war
and
the
anticipated
shortages
of
certain
goods
if
agreements
are
not
reached.

A
critical
point
to
monitor
will
be
whether
Powell
addresses
the
possibility
of
implementing
additional
rate
cuts
if
the
labor
market
shows
signs
of
strain
due
to
the
prolonged
trade
conflict.
The
latest

jobs
report
represents
a
baseline
that
may
not
fully
capture
the
effects
of
recent
events,
and
as
time
progresses
without
a
resolution,
there
is
a
potential
for
increased
labor
market
pressures,
especially
considering
federal
government
job
reductions
and
the
impact
of
budget
cuts
on
economic
circulation.

Should
the
Fed
show
a
readiness
to
intervene
if
jobless
claims
rise,
coupled
with
insights
from
Fed
presidents
engaging
with
companies
and
CEOs
regarding
workforce
adjustments,
it
can
lay
the
groundwork
for
a
more
dovish
Fed
to
cut
rates.
Furthermore,
if
the
focus
remains
on
preventing
sustained
inflation
linked
to
tariffs
or
shortages,
this
may
influence
the
bond
market
in
a
negative
way.

Fed
presidents
take
their
own
stands

This
week’s
meeting
is
poised
to
signal
a
shift
among
Federal
Reserve
presidents
away
from
Powell’s
position.
If
Powell
takes
a
more
hawkish
stance,
the
question-and-answer
session
will
undoubtedly
become
crucial.
Reporters
are
likely
to
probe
whether
other
Fed
presidents
are
beginning
to
prioritize
the
labor
market
over
inflation
concerns
tied
to
tariffs. 

We’ve
already
heard
Fed
President
Waller
assert
that
he
is
prepared
to
adopt
a
more
aggressive
approach
to
rate
cuts
if
the
labor
market
starts
to
decline.
Likewise,
Fed
President
Bowman
has
recently
made
it
clear
that
the
labor
market
will
be
prioritized
over
inflation
in
their
discussions.

If
we
continue
to
see
increasing
divergence
on
this
topic
—
in
this
meeting
and
others
—
it
could
pave
the
way
for
a
significant
confrontation
within
the
Fed,
complicating
Powell’s
role
if
the
labor
market
experiences
setbacks.

Conclusion

While
no
actions
will
be
taken
by
the
Fed
in
this
meeting,
we
are
on
the
brink
of
a
fascinating
two-year
chapter
for
the
Federal
Reserve.
With
Powell’s
term
set
to
conclude
in
May
2026,
the
path
ahead
could
reveal
significant
challenges.
As
the
labor
market
potentially
weakens,
we
might
see
Powell
at
odds
with
some
Fed
presidents,
President
Donald
Trump
and
the
American
public,
all
of
whom
will
scrutinize
his
leadership
if
job
growth
falters. 

Furthermore,
the
emergence
of
a
shadow
Fed
president
in
the
coming
year
could
add
another
layer
of
complexity
to
the
landscape.
So,
let’s
embrace
the
role
of
detectives
and
closely
examine
not
only
the
Fed’s
actions
but
also
their
statements
and
responses
in
press
briefings,
as
these
will
be
critical
indicators
of
future
developments.