Balance of Power – "Powell Signals Another Cut"

Bloomberg | October 14, 2025
Hosts: Joe Mathieu, Kailey Leinz
Guests & Contributors: Molly Smith (Bloomberg Economics Editor), Rick Davis (Republican Strategist), Jeannie Shanz Zaino (Harvard Kennedy School), Michael McKee (Bloomberg Economics Correspondent), Ian Marlow (Bloomberg National Security Editor)

Episode Overview

On this episode of Balance of Power, Bloomberg correspondents analyze key developments from Jay Powell’s latest speech, the market’s upbeat reaction, and the intricate challenges of the ongoing U.S. government shutdown. The panel delves into the Federal Reserve’s monetary policy outlook, roiling data uncertainties caused by the shutdown, congressional gridlock over government funding, and major foreign policy moves—specifically U.S. actions in Argentina and escalating interventions in Venezuela. Special guests offer real-time reporting and fresh analysis, capturing the high stakes and tensions in Washington and beyond.

Key Discussion Points & Insights

1. Jay Powell’s Speech and Market Reaction

[00:49–03:12, 25:29–27:24]

• Powell’s Message:
  Fed Chair Jay Powell signals the central bank may soon pause its balance sheet runoff, citing “signs...that liquidity conditions are gradually tightening.”
  • "Our long stated plan is to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserves conditions." — Powell (quoted at [02:19])
• Market Impact:
  The speech sparked a relief rally, with the S&P 500 and Dow reversing earlier losses.
• Key Analyst Take:
  Molly Smith: “Clearly the sign here is that...Powell still sees signs of weakening in the labor market and that's going to lend itself to another cut later this month.” ([03:12])

2. Monetary Policy in a Data Vacuum (Shutdown Effects)

[03:12–07:53, 09:59–10:47, 27:24–29:01]

• Shutdown Disrupts Fed’s Data:
  With the government shutdown entering its 14th day, public economic data is scarce, forcing the Fed and markets to rely heavily on private sector indicators.
  • “Powell did touch on...the lack of government data in the shutdown and talking about the abundance of labor market data, but not so much on the inflation side.” — Molly Smith ([03:12])
• Risks to CPI Reports:
  With BLS staff idle except for those prepping September's CPI, fresh October inflation data may be spotty or missing; “almost two thirds of the price collection just isn't happening right now.” — Molly Smith ([05:37])
  • Consequences: Potential for missing, delayed, or unreliable inflation data, leading to heightened uncertainty around future Fed meetings.
• Fed’s Dilemma:
  • “Do we get to a point where we're missing enough data that the Fed has to delay a meeting or issue a statement…?” — Joe Matthew ([06:21])
  • “I'm honestly not even sure if the Fed...can even do that...they have to work with what they've got.” — Molly Smith ([06:37])
• Private and Anecdotal Data:
  • The Beige Book takes on added significance as a key source of anecdotal economic intelligence.
    • “Beige Book is the Bible.” — Joe Matthew ([09:19])
    • “There are really fun snippets in there if you have the patience to go through all...12 Reserve Banks.” — Molly Smith ([09:20])
  • Labor market data is more robust compared to inflation data, thanks to alternative trackers.

3. The Ongoing Federal Government Shutdown: Political Maneuvering & Real-World Costs

[12:28–24:10]

• Congressional Gridlock:
  • The House and Senate remain deadlocked with alternating party bills failing, and Speaker Mike Johnson signals no negotiations until Democrats yield.
    • “‘We're barreling toward one of the longest shutdowns in American history.’” — Speaker Mike Johnson (quoted by Associated Press, [14:00])
• Mitigating Pain Points:
  • The administration moves to ensure continued pay for active-duty military, federal law enforcement, and WIC (Women, Infants, and Children) nutrition program to soften public impact, thus reducing immediate pressure to resolve the shutdown.
  • “They are taking active steps to remove all the pain that could get these sides together and talking by paying the troops, paying law enforcement, keeping WIC afloat.” — Jeannie Shanz Zaino ([16:07])
• Strategic Calculations:
  • Republicans argue the House has done its job by passing a “clean CR” (Continuing Resolution), blaming Democrats for the impasse.
    • “The House has done their job. They passed a clean CR. It’s exactly what we've done 100 times before.” — Rick Davis ([18:18])
  • Democrats counter that fundamental legislative responsibilities are being abdicated and decry the focus on non-domestic aid.
    • “What we should be fighting about is the fact that the branch of government that you speak or run is completely abandoned, its role as the first and most important branch of the greatest country in the world.” — Jeannie Shanz Zaino ([16:07])
  • Administration is accused of "bad counter programming" by announcing a $20 billion bailout for Argentina during the shutdown.
    • “$20 billion will pay those military guys for another month and a half. There's no rational explanation as to why this administration is...bail[ing] out Argentina.” — Rick Davis ([22:57])

4. International Policy Moves: Argentina and Venezuela

[00:49, 22:32–23:53, 29:01–33:14]

• Argentina Bailout:
  • U.S. supports a $20 billion “credit swap” (or “bailout”) for Argentina under President Javier Milei amid pushback over optics and priorities during the shutdown.
    • “I’m using the word bailout because that's what the smart analysis has called this.” — Joe Matthew ([22:32])
• Venezuela Strikes:
  • President Trump orders a lethal strike on a vessel in international waters off Venezuela, escalating anti-narcotics operations. Critics question legal authority and risks of expanding military engagement.
    • “According to him, all the power he wants. Then according to quite a lot of other people, he's acting illegally against people who are not armed combatants of a state with which the US is at war.” — Ian Marlow ([31:08])
    • Concern over possible expansion to mainland Venezuela, which would require congressional authorization.

5. Middle East Dealings: Hostage Release and Ceasefire Fragility

[33:14–37:38]

• Hostages and Ceasefire:
  President Trump claims success in hostages’ release from Gaza but stresses that not all remains have been returned, threatening renewed pressure if Hamas fails to comply.
  • “A big burden has been lifted, but the job is not done. The dead have not been returned as promised.” — President Trump statement (via Joe Matthew, [33:44])
• Regional Stakes:
  • Aid to Gaza linked to compliance with release of remains; Israel reduces aid as tensions rise.
  • The complexity and fragility of the ceasefire are a major concern, with all parties wary of renewed violence.
  • Prospects for a “two state solution” remain bleak; Israel's government and many in the Knesset firmly oppose it.
    • “The Israeli parliament condemned any attempt to go forward with this. They view it as rewarding Hamas for October.” — Ian Marlow ([36:00])
• Normalizing Arab-Israeli Relations:
  • Economic incentives for Arab states to normalize with Israel exist but are complicated by “long standing cultural issues.”

Notable Quotes & Memorable Moments

• On Fed’s Policy Dilemma in a Data Vacuum:

  • "You go to war with the army you have." — Joe Matthew ([07:01])

• On Congressional Stalemate:

  • “Nobody that I know of on the Democratic or Republican side is fighting about paying the troops. What we should be fighting about is the fact that the branch of government that you speak or run is completely abandoned, its role as the first and most important branch of the greatest country in the world.” — Jeannie Shanz Zaino ([16:07])

• On Political Optics of Foreign Aid Amid Shutdown:

  • “It’s bad counter programming like none I’ve ever seen.” — Rick Davis, on the Argentina bailout ([22:57])

• On Dangerous Precedent of Venezuela Military Actions:

  • “Are we going to see it on...the Venezuelan mainland with attacks that might bring, you know, U.S. Air Force in contact with Venezuelan Air Force? We have no idea.” — Ian Marlow ([31:32])

• On the Mideast Ceasefire:

  • “This is everything you’re talking about are potential flashpoints that have long bedeviled any attempt to get this type of ceasefire.” — Ian Marlow ([35:01])

Important Segment Timestamps

| Segment | Timestamps | |--------------------------------------------|---------------| | Powell’s speech reaction | 00:49–03:12 | | Fed & market outlook (w/ Molly Smith) | 03:12–10:47 | | Shutdown impact & data woes | 03:12–07:53 | | Congressional gridlock and funding debate | 12:28–24:10 | | Argentina bailout debate | 22:32–23:53 | | Powell’s press Q&A with Michael McKee | 25:29–29:01 | | U.S.-Venezuela naval strike discussion | 29:01–33:14 | | Middle East ceasefire and hostages | 33:14–37:38 |

Summary Tone

The discussion is brisk, analytical, and often pointed, blending economic, political, and global perspectives with Bloomberg’s signature blend of market awareness and legislative analysis. Real-time developments and sharp exchanges reflect both urgency and deep frustration over the state of U.S. governance in the midst of mounting global challenges.