Powell challenges the market's idea of a Fed on autopilot Hamza ShabanOctober 30, 2025 at 3:00 AM 0 This is The Takeaway from today's Morning Brief, which you can sign up to receive in your inbox every morning along with: What we're watching What we're reading Economic data releases and earnings Fed...
- - Powell challenges the market's idea of a Fed on autopilot
Hamza ShabanOctober 30, 2025 at 3:00 AM
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This is The Takeaway from today's Morning Brief, which you can sign up to receive in your inbox every morning along with:
What we're watching
What we're reading
Economic data releases and earnings
Fed Chair Jerome Powell reminded us that next meeting's decision is made... next meeting.
After moving to lower rates on Wednesday by a quarter point, the head of the central bank took care to say the next cut might not come as soon as the market expects it to.
"A further reduction in the policy rate at the December meeting is not a foregone conclusion," Powell said at the press conference, adding "far from it" for good measure.
The statement prompted stock charts to plunge into the red and Treasury yields to spike before ending the day where they began.
"Not a foregone conclusion" sounds scary when you are expecting a cut. And the market's first reaction was to pull back, perceiving a gap between Wall Street expectations and the Fed's likely course in six weeks' time.
Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments
Powell went so far as to say that this particular warning was different. He noted that he always says the central bank makes data-dependent decisions at the time of its policy meeting, and not before. But "I'm saying something in addition here," he said, emphasizing the uncertainty of the Fed's path ahead given upside risks to inflation, downside risks to the labor market, a tool that can't solve both at the same time, and very little data to work with.
In prior projections in September, policymakers signaled the Fed would ease in both October and December. And in the absence of data amid the government shutdown, markets had come to an understanding that a data blackout would mean hewing to the autopilot's course charted by the dot plot.
Powell's special "something in addition here" seemed to poke a hole in that idea.
But how can the Fed remain data dependent without the best data? It can be done, Powell said, as he and his colleagues glean insight from other sources. But the context of the shutdown may influence the Fed's next decision.
"What do you do when you are driving in the fog? You slow down," Powell said. "I don't know how that is going to play into things. The data may come back. But there's a possibility that it would make sense to be more cautious about moving." (Critically, slowing down does not mean easing the throttle back on rates — it is a tricky metaphor.)
As the trading day came to a close and the losses pared back, cooler heads prevailed and investors appeared to take Powell's remarks in stride. A cautious note, or even an explicit warning, isn't a "no" either.
While Powell tried to frame the day's decision — which came with two dissents in opposite directions — as a reflection of a healthy consensus on the Fed, he made clear that his colleagues disagree on what to do next.
"The strongly differing views were really about the future, what does that look like," he said, as attention turns to December.
Traders are still pricing in the likelihood of another cut, even as Powell sowed doubt. He doesn't know what's going to happen, and the clashing opinions of his colleagues, blanketed with a data fog, won't make the choice any easier.
Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban.
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