...Just Another Fed Meeting

Yesterday's Fed meeting had all the suspense of a slow-burning thriller—except the plot twist was that Jerome Powell didn’t blink. Despite slowing economic data, elevated inflation expectations, and some not-so-subtle nudging from Mar-a-Lago, the Fed opted to keep rates steady and stay data-dependent.

In other words: “We’ll wait and see... but we’re definitely watching.”

Powell’s Key Takeaways (Abridged for Sanity)

• “Meaningful Inflation” Expected from Tariffs
  Powell clearly stated that recently implemented tariffs are expected to cause a meaningful amount of inflation. For those unfamiliar with Fed-speak, “meaningful” is a notch above “notable” and just shy of “uh-oh.”
• Current Policy Is Restrictive
  The Fed acknowledged that interest rate policy is modestly restrictive, and inflation expectations have ticked up from earlier this year. That’s a diplomatic way of saying: “We might be tightening the screws while the economy’s already slowing.”
• The Economy Is Slowing… But Still Solid
  Powell continued to walk the tightrope, noting the economy is cooling but still in a “good place.” Translation: No fire, but maybe keep the extinguisher nearby.
• More Data Needed Before Making a Move
  July, August, and September data will be crucial. That’s when the real impact of tariffs is expected to show up—assuming, of course, no one changes the rules again before then.

Market Response: Hope, Then Hiccup

Markets initially took the Fed’s “we’re in a good place” stance as a green light for optimism. Stocks rose in the early afternoon as traders fantasized about a strong economic outlook and a soft landing.

Then Powell dropped the “meaningful inflation” line.
Cue the sell-off.

By the end of the session, markets had given up their gains and closed slightly negative—a reminder that hope is not a strategy, especially when your central bank chair uses words like “restrictive” and “inflation” in the same Q&A.

Conclusion: Reading Between the Lines (and Tweets)

There’s a tug-of-war playing out between the Fed’s patient, data-driven posture and political pressure to “just cut already.” President Trump has been vocal—predictably—arguing that the Fed is historically late to the party when it comes to rate moves. And he’d like to make sure they arrive early this time, preferably with a bow on it.

Powell, for his part, is trying to stay above the fray, but the Fed’s acknowledgment of restrictive policy and inflation risks suggests they’re more concerned about tariff-driven inflation than rising unemployment.

That said, there’s still a divide in opinion:

• Team Fight Inflation (Consensus View) thinks tariffs will push prices up significantly, and the current tight labor market doesn’t warrant a rate cut now.
• Team Fight Recession argues tariffs will slow growth more than expected, reducing demand significantly, potentially lowering prices (deflationary), and requiring rate cuts to support the economy. Recent TIPS-Treasury Inflation Protected Securities, Auctions put 5-year break-evens near 2.32% - 2.35%, pointing to muted inflation expectations from the bond market.

The Fed, ever the referee, has had a lot thrown at it—tariffs, war in the Middle East—and so they will wait for the data, and probably issue another carefully worded statement that tells us everything and nothing at once.

So for now, we wait.

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About the Author – Tim Macarak CFP®

Tim Macarak is President & Head of Wealth Management at Member’s Wealth, a boutique wealth management firm that offers a comprehensive approach to serving individuals, families, business owners, and institutions. The firm’s goal is to preserve and grow its clients’ wealth to endure overtime, while thoughtfully evolving its strategy to suit an ever-changing world. With over 20 years of wealth management experience, Tim and the Members' Wealth team thrive on bringing clarity and confidence to clients' unique situations. He believes everyone needs sound financial advice from someone whose interests are aligned with theirs and is determined to put service before all else.

Tim is a CERTIFIED FINANCIAL PLANNER® Professional. Outside work, he enjoys spending time with his wife and kids, Skiing, Coaching, and Traveling. To learn more about Tim, connect with him on LinkedIn.

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