On Thursday, renowned financial journalist Nick Timiraos, known as the "new Fed correspondent," wrote that when the Federal Reserve announced its rate cut on Wednesday, it appeared on the surface to be routine monetary policy operations, but in reality it may represent Powell's "final stand" in proving the Fed's independence and fulfilling its "dual mandate."

With Powell's chairmanship set to end in the spring, he faces unprecedented political confrontation and economic uncertainty.

The article's core argument suggests that Powell is engaging in a high-risk policy gamble—choosing to cut rates when the economy has not sent clear recession signals. This marks the third time during his tenure that he has attempted this delicate operation: cutting rates not because recession is imminent, but to prevent one from occurring.

Previously, Trump had repeatedly called for Powell to immediately cut rates, and by larger margins than he anticipated.

The article also emphasizes that the Fed is responding to extraordinary challenges to traditional independence while dealing with complex issues like slowing growth and sticky inflation. These factors make current policy decisions more complex and risky than ever before.

Employment Market Weakness Raises Concerns: Structural Changes or Temporary Cyclical Weakness?

What factors prompted the Fed to make this rate cut decision? The answer largely points to significant labor market deceleration.

Powell stated on Wednesday that seven weeks ago when the Fed agreed to keep rates unchanged, "labor market conditions were solid." But the latest revised data shows that August's three-month average job growth dropped from the initially reported 150,000 to 29,000—a massive difference that reveals the true weakness of the employment market. As Powell noted, this data indicates "there are indeed significant downside risks."

Some economists believe the Fed's actions are not aggressive enough, including this week's 50 basis point rate cut. Jeffrey Cleveland, chief economist at Los Angeles-based asset management firm Payden & Rygel, pointed out:

"Employment growth rarely reaccelerates after slowing to current levels unless there's a recession in between."

Facing the current complex economic environment, a key question is: might the Fed be misreading structural changes as temporary cyclical weakness? This concern is not unfounded.

The Trump administration's policy experiments—including immigration restrictions that limit labor force growth and broader tariff increases than in the first term—may be permanently altering the economy's capacity to produce goods and services. This has some experts particularly concerned about the risk of excessive rate cuts.

Former Bank of America global economic research head Ethan Harris warned that we shouldn't assume that because economists believe the Fed will bring down inflation, ordinary people will believe it. There's a disconnect here. Ordinary Americans are very worried about inflation, and inflation concerns drove the last election. After years of high inflation, consumers and businesses may become more accustomed to regular price increases, allowing higher inflation to persist.

Difficult Balance Under Political Pressure

In this complex situation, how does Powell maintain consensus within the Fed? This is undoubtedly a major test of his leadership capabilities.

Despite disagreements about the outlook and facing enormous political pressure, Powell has so far managed to maintain consensus. The three Fed officials who voted this week—all regional Fed bank presidents—recently expressed concerns about inflation but still supported Wednesday's rate cut decision. Two Fed governors who voted against in July also supported this action.

Notably, the only dissenting vote this week came from Fed Governor Steven Milan, who was a senior Trump advisor until early this week but was confirmed and sworn in just in time to participate in this meeting's vote. Milan favored a larger half-percentage point rate cut and expects rates to fall to just below 3% by year-end.

Looking ahead, what challenges and opportunities does the Fed face? Interest rate projections highlight the prospect of more controversial debates ahead.

Among the 19 meeting participants, 7 believe no further rate cuts are needed this year, while 2 think only one more cut is necessary. This division suggests that regardless of who serves as Fed chair, disagreements may persist. Powell frankly acknowledged the dual risks of employment weakness and persistent inflation, noting there is no risk-free path. If future data cannot resolve disagreements, Powell will face the prospect of defending central bank independence in every risk-filled decision.

Additionally, the thriving stock market highlights a question: despite concerns about labor market weakness and housing sector stagnation, consumer spending remains stable, and businesses are investing heavily in artificial intelligence infrastructure. The question is whether spending will eventually weaken as income growth slows, or whether it can be sustained by other forces.

Overall, the policy experiment Powell is conducting may determine the Fed's future independence and effectiveness. In the gap between political pressure and economic reality, he must prove that an independent central bank can still effectively respond to complex economic challenges. This relates not only to the U.S. economy's short-term performance but may also influence the future direction of global monetary policy.

Three Possible Outcomes from Historical Experience

So what results might Powell's "policy gamble" bring?

The article notes that history provides three possible scenarios for reference:

The most ideal outcome would be to recreate the "soft landing" the Fed successfully achieved in the mid-1990s. At that time, the Fed successfully extended the economic expansion period without triggering inflation surge by appropriately adjusting the pace of rate hikes—this is considered the "holy grail" achievement that every Fed chair aspires to replicate.

However, history also warns of existing risks. The premature rate cuts of 1967 helped ignite persistent price pressures of the 1970s, which worsened further under the influence of political pressure and misjudgment of economic conditions.

Additionally, in 1990, 2001, and 2007, rate cut measures failed to prevent recessions from occurring, reminding us of monetary policy's limitations.