TLDR
- Powell and Bowman express concerns about labor market weakness despite overall economic resilience
- Fed cut rates by 25 basis points, the first reduction in nine months
- Markets expect additional rate cuts in October and December 2025
- Powell warns of “no risk-free path” between inflation and unemployment priorities
- Bitcoin dropped below $113,000 as Powell tempered expectations for aggressive rate cuts
Federal Reserve Chair Jerome Powell is walking a tightrope between competing economic priorities as the central bank attempts to balance inflation concerns with a potentially weakening labor market. In recent public appearances, Powell has emphasized the delicate nature of current monetary policy decisions following the Fed’s first interest rate cut in nine months.
Speaking at the Greater Providence Chamber of Commerce’s economic outlook luncheon in Rhode Island, Powell acknowledged the changing economic landscape. “Recent data show that the pace of economic growth has moderated,” Powell stated in his prepared remarks. He noted that while unemployment remains low, it has been edging upward, and job growth has slowed.
The Fed’s decision last week to lower interest rates by 25 basis points marked a turning point in monetary policy. This was the first rate reduction since early 2025, indicating a shift in the central bank’s focus toward supporting employment rather than exclusively fighting inflation.
Vice Chair Michelle Bowman echoed these concerns in her own remarks to the Kentucky Bankers Association. “The US economy has been resilient, but I am concerned about the weakening in labor market conditions and softer economic growth,” Bowman said.
Powell made it clear that the Fed faces difficult choices with no perfect solutions. Cutting rates too aggressively could reignite inflation, while maintaining tight monetary policy for too long might unnecessarily harm employment.
Market Expectations and Bitcoin Response
Financial markets are currently pricing in high probabilities of additional rate cuts at the Fed’s final two meetings of 2025. Futures markets suggest investors expect reductions in both October and December, though Powell has avoided making specific commitments about future actions.
Powell’s recent comments have had an immediate impact on cryptocurrency markets. Bitcoin dropped below $113,000 during his speech as he dampened expectations for aggressive rate cuts. This represents a divergence from equity markets, which have generally responded positively to expectations of monetary easing.
Despite the price pressure, institutional interest in cryptocurrency remains strong. CoinShares reported that Bitcoin exchange-traded funds attracted $977 million in inflows last week, with total crypto inflows reaching $1.9 billion.
The relationship between Bitcoin and traditional markets has shown some unusual patterns recently. Market commentators have pointed to a widening gap between Bitcoin’s performance and that of equity indices like the Nasdaq. Some analysts predict this divergence will eventually correct itself, potentially leading to a swift rebound in Bitcoin prices.
Current situation:
1. Stocks are rising like the US economy is soaring
2. Oil prices are falling like we are entering a recession
3. Gold is rising like the Fed is cutting rates into inflation
4. Bitcoin is falling like Fed rate cuts are postponed
5. Home prices are rising…
— The Kobeissi Letter (@KobeissiLetter) September 22, 2025
Inflation Concerns and Policy Balance
Powell addressed inflation directly in his remarks, noting that recent data shows prices “remain somewhat elevated” despite progress made over the past two years. He suggested that tariff-related price increases would likely have a “one-time pass-through” effect rather than triggering sustained inflationary pressure.
This view on tariffs may represent a subtle shift from earlier Fed communications, which had warned that trade policies could fuel more persistent inflation in the latter half of the year.
The divergent views among Fed officials highlight the complexity of the current economic situation. While some members like Raphael Bostic and Alberto Musalem have expressed concerns about inflation risks, others including Stephen Miran have advocated for more aggressive rate cuts to support the labor market.
The Fed’s balancing act comes at a critical time for financial markets. DBS Bank in Singapore characterized the Fed’s latest meeting as showing “dissonance and contradictions,” noting inconsistencies between economic projections and Powell’s comments on employment risks.
Powell emphasized that the Fed’s policy is not following a preset course. “We will continue to determine the appropriate stance based on incoming data, evolving outlook, and the balance of risks,” he stated, underscoring the data-dependent nature of future decisions.
As markets digest these comments, investors will be closely watching economic indicators in the coming weeks for clues about the Fed’s next moves at its October meeting.
