The Federal Reserve’s decision to cut interest rates last week was widely expected, but the deliberations revealed sharp divisions — with forecasts and statements that appeared riddled with contradictions.
“I have not seen a meeting with so much contradictions,” wrote Bloomberg economist Anna Wong, pointing to the Fed’s quarterly projections.
The Federal Open Market Committee (FOMC) raised its average growth outlook for 2025 while lowering unemployment forecasts for 2026 and 2027 — even as it warned that “downside risks to employment have increased.”
Jim Bianco of Bianco Research echoed Wong’s concerns, noting that one Fed member still projects another rate hike this year while another foresees the equivalent of five cuts over just two meetings.
Bianco also flagged Fed Chair Jerome Powell’s use of the phrase “risk management” to justify the latest cut. “If this is the case now, then the Fed cannot be data dependent,” he said. “I fear that a ‘risk management’ cut is a political decision. He wants to get Trump off his back.”
Powell has repeatedly clashed with President Trump over the path of monetary policy, with Trump publicly pressuring the Fed to pursue aggressive easing. After the Sept. 16–17 FOMC meeting, Trump urged on Truth Social for a “50, 75, maybe 100” basis-point cut.
The Fed is confused because the data is confusing
The Federal Reserve’s decision to begin cutting interest rates comes against a backdrop of conflicting signals about the health of the U.S. economy.
Earlier this month, the Bureau of Labor Statistics issued sweeping revisions to nonfarm payrolls, slashing job growth by 911,000 positions between April 2024 and March 2025 — a change the Trump White House called “the biggest revision on record.”
At the same time, inflation remains stubborn. The Fed’s preferred gauge rose to 2.9%, the highest since February and still well above the central bank’s 2% target.
By cutting rates in an environment of rising inflation, the Fed has “lost all credibility when it comes to fighting inflation,” wrote Charlie Bilello, chief market strategist at Creative Planning.
At the same time, key measures of construction spending are flashing recession signals, as economists note that prolonged downturns in the sector often precede broader economic slumps.
The irony is that these warning signs aren’t mirrored in the stock market, with the S&P 500, Dow Jones, and Nasdaq all closing at record highs in back-to-back sessions last week.
JPMorgan Wealth Management notes that part of the rally reflects corporate margins nearing historic highs, alongside growing optimism about the next six to 12 months.
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