Unmistakably' hawkish Powell highlights 'disconnect' between Fed and markets

Although the Federal Reserve cut rates as expected last week, and made only very minor changes to its statement that largely reflected the lack of economic data, the message from Powell’s press conference was unmistakably hawkish.

He made it clear that another cut at the next meeting in December is far from a foregone conclusion. Further hawkish noises came later in the week from Federal regional presidents who will be rotating into a voting position in 2026.

This highlights the disconnect between Fed officials and the market regarding the timing and size of any further cuts.

As we wait for the Federal government to reopen and resume publishing economic data, that looming conflict between the Trump administration and the Federal Reserve is what will likely come back into focus.

A big focus in the New Year will undoubtedly be the race to be named as the next Fed chair once Powell’s term comes to an end in May.