"Federal Reserve Mouthpiece": Next year's rate cuts will mainly rely on three pathways, with Trump continuing to challenge the independence of the Federal Reserve

On December 11, “Federal Reserve mouthpiece” Nick Timiraos wrote that Powell forcefully approved a rate cut plan, which can be said to be the most widely opposed decision he has faced during his nearly eight-year term. Meanwhile, this weakening of support also sends a clear message to President Trump and his successors: lowering interest rates is not as easy as you think. By 2026, there are mainly three ways to lower interest rates: 1) Wait for evidence that inflation is declining (which will take some time at least). 2) Increasing evidence shows that the labor market is in very bad shape. This means the economy is likely to weaken in a way no president would want to see. 3) Additionally, there needs to be a “significant change in the composition of the Federal Reserve meeting room.” Investors are closely watching this: the recent actions by the Trump administration challenging the Federal Reserve’s institutional norms “are like raptors in the first ‘Jurassic Park’ movie testing the fences to see where the power supply is weak.” “The moat currently seems impregnable. But I am not saying it will be forever.”