Bloomberg Businessweek: Instant Reaction – Jay Powell on the Fed Decision

Date: September 17, 2025
Hosts: Tom Keene, Paul, John, Carol Massar, Tim Stenovec
Guests: Bill Dudley (Former NY Fed President), Mike McKee (Bloomberg), Jeff Rosenberg (BlackRock)

Overview:

This episode features instant analysis and expert reactions to a pivotal September 2025 Federal Reserve meeting, where Chair Jay Powell announced a 25 basis point rate cut. The conversation tackles the internal contradictions within the Fed, the fading power of ‘forward guidance,’ the highly dispersed range of committee views, and concerns over credibility and political influence as 2026 approaches. Guests Bill Dudley, Mike McKee, and Jeff Rosenberg unpack the implications for markets, inflation targets, labor, and future monetary policy under potential new leadership.

Key Discussion Points & Insights

1. A Divided Fed and Unclear Forward Guidance

• Summary: The hosts and guests reflect on a Fed meeting marked by internal tension and a lack of consensus on future policy, notably highlighted by the diversity in the Fed’s dot plot.

  • “I have not seen a meeting with so many contradictions. This is a low conviction Federal Reserve with limited, limited visibility and a very wide range of views on the future.”
    — Tom Keene [01:34]
  • “The idea of forward guidance dying. Because ultimately how can a Federal Reserve with this level of dispersion in views really give any sense of their reaction function?”
    — Paul [02:21]

• Dot Plot Disarray:

  • “At the very bottom of that spread is a dot that's basically projecting a massive amount of rate cuts… Look above it. You’ve also got a dot there that's looking for a Federal Reserve that could be hiking interest rates over the next several meetings. These dots are all over the place.”
    — Tom Keene [03:00]

2. Risk Management and the Insurance Cut

• Summary: The 25bps cut is framed as a ‘risk management’ measure, responding more to rising risks in the labor market than to a convincing victory over inflation.

  • “We think that the risks on the unemployment side have risen more than the risk on the inflation side. And so given that, we should be less restrictive. And so we're taking out essentially a risk management cut.”
    — Bill Dudley [04:21]
  • “This is an insurance rate cut. That’s all it is. And it doesn’t really foreshadow what’s going to happen going forward.”
    — Bill Dudley [06:20]

• Internal Uncertainty:

  • Divergence in projections, especially for 2026–27, with nine officials favoring one more cut and nine favoring two.
  • The ‘outlier’ dot, attributed to Stephen Myron, pushes for much more aggressive easing.

3. Fed’s Credibility and Inflation Target Doubts

• Summary: Repeated failure to reach the 2% inflation target while continuing to cut rates raises concerns over long-term credibility and the anchoring of expectations.

  • “Should we lose patience with this Federal Reserve? What is this? ‘In two years time we'll hit our inflation target.’”
    — Tom Keene [07:51]
  • “Every year you continue to go with inflation above 2%. The risk is that inflation expectations finally become unanchored and the attacks on the Fed's independence obviously increase that risk.”
    — Bill Dudley [08:20]

• Public Confidence:

  • Mike McKee raises the risk of higher inflation expectations becoming “embedded” if the Fed repeatedly misses its own deadline [09:15].
  • Dudley and McKee agree: The Fed is struggling to balance inflation reduction with labor market stability, and communication is fraught.

4. Politics, Personnel, and What’s Ahead for 2026

• Summary: The conversation shifts to the outsized influence that new appointments and upcoming elections may have on future policy direction, with implications for market perception and the Fed’s independence.
  • Tom Keene notes: “This is the last set of forecasts you'll get from Chairman Powell without knowing who the incoming Fed chair is going to be. By the time December we'll know who the Fed chair is.” [13:50]
  • “It does raise the question… if the President gets more people on the board, where do we go from here? And the Myron dot is a sign that the President's people would definitely try to push rates lower whether or not the economy justifies it.”
    — Mike McKee [12:05]
  • John: “That's going to be a big issue… you see a disconnect in the bond market incorporating the possibility of a different makeup of the FOMC underlying the expectations.” [17:16]

5. Market Reactions and Risk Premia

• Summary: The panel discusses the market’s cautiously muted response and the challenging context for interpreting long-term rates given the lack of clear direction and rising political risk.

  • “There is no risk free path. And that's a really important concept… there's risks to erring on the dual mandate.”
    — John [18:15]
  • “You can get stable prices at 3% as long as it's not accelerating, but you're not reaching your target. So it's shifting the target and you lose the credibility and the anchoring of to a 2% level. What does that mean? It means a higher level of long term interest rates. It means a higher level of term premium.”
    — John [20:36]
  • “If this is essentially a central bank that has chosen… the labor market over inflation, then you would expect there to be a much bigger risk premia on some of the long term bond yields.”
    — Paul [21:58]

• Political Scenarios:

  • Discussion of possible future Fed chairs (Chris Waller, Rick Rieder, Stephen Myron) and their potential impact on market expectations and risk premia [23:45].

Notable Quotes & Memorable Moments

| Timestamp | Speaker | Quote | |-----------|--------------|----------------------------------------------------------------------------------------| | 01:34 | Tom Keene | “This is a low conviction Federal Reserve with limited visibility and a wide range of views…” | | 02:21 | Paul | “That sound you hear, that's the idea of forward guidance dying.” | | 03:00 | Tom Keene | “These dots are all over the place…” | | 04:21 | Bill Dudley | “Given that, we should be less restrictive. And so we're taking out essentially a risk management cut.” | | 06:20 | Bill Dudley | “This is an insurance rate cut. That’s all it is. And it doesn’t really foreshadow what’s going to happen going forward.” | | 08:20 | Bill Dudley | “The risk is that inflation expectations finally become unanchored and the attacks on the Fed's independence increase that risk.” | | 09:15 | Mike McKee | “Jay Powell was trying to walk a very fine line because he's got a very divided committee. Nobody is sure what's going to happen going forward…” | | 13:50 | Tom Keene | “This is the last set of forecasts you'll get from Chairman Powell without knowing who the incoming Fed chair is…” | | 18:15 | John | “There is no risk free path. And that's a really important concept…” | | 20:36 | John | “…you lose the credibility and the anchoring of to a 2% level. What does that mean? It means a higher level of long term interest rates. It means a higher level of term premium.” |

Timestamps for Key Segments

• [01:34] Opening reactions, market confusion, and the “low conviction” Fed
• [02:21] The end of meaningful forward guidance
• [03:00] Discussion of the dot plot’s wide dispersion and implications
• [04:21] Bill Dudley on the reasoning and risks behind the “insurance cut”
• [07:51] Skepticism on hitting the 2% inflation target; credibility issue for Fed
• [09:15] Mike McKee’s on-the-ground view and press conference debrief
• [13:50] Outlook for the post-Powell era and the politicization of policy
• [15:09] Jeff Rosenberg’s synthesis: labor market slowdown, bond market-Fed alignment, and future disconnects
• [18:15] The “no risk free path” dilemma for monetary policy
• [20:36] The consequences for long-term rates and credibility
• [21:58] Policy choices, labor market trade-offs, and political risk premium

Tone and Language

The episode maintains a frank, analytical, sometimes wry tone—reflecting both caution and skepticism toward Fed messaging. Hosts and guests use vivid metaphors ("forward guidance dying", "dots all over the place", “risk management cut”) and occasionally inject humor and personal anecdotes to ground the conversation.

Conclusion

This episode captures the confusion and complexity facing the Fed, with an unprecedented lack of consensus and a sense that old tools (like forward guidance) are breaking down. Panelists grapple with not only the technical aspects (rate cuts, dot plot dispersion, inflation targeting) but also the intensifying role of politics and personnel in shaping the central bank’s trajectory. Key questions about credibility, independence, and market trust dominate, with the labor market slowdown and potential leadership changes at the heart of future uncertainty for U.S. and global markets.