Powell’s Fed Rate Cut Amplifies Risk in a Data-Starved Market
Washington D.C., USA/London-UK, November 26, 2025
The world’s financial markets are gripped by GLOBAL ECONOMIC JITTERS after the U.S. Federal Reserve, led by Chairman Jerome Powell, announced a surprise interest rate cut last month, a move that experts warn is intensifying risk across the global economy.
Operating in a “data-starved market” caused by domestic political turmoil, the U.S. central bank has pivoted away from its inflation fight to focus on a visibly weakening employment sector.
This shift not only signals deeper concern about American recessionary pressures but also throws a challenging curveball to central banks across the world, including the Bank of England (BoE) in London-UK, which must now navigate a new wave of exchange rate volatility and imported price pressures.
The Federal Open Market Committee (FOMC) in Washington D.C. announced on October 29 a decision to lower the target range for the federal funds rate by a quarter-point, bringing it to 3-3/4 to 4 percent.
This was a significant reversal in the Fed’s stance, marking the first cut since late last year and a sharp departure from the aggressive tightening cycle of 2022 and 2023.
Chair Powell justified the cut by citing a crucial shift in the “balance of risks,” stating that downside threats to employment had begun to outweigh the risks from still-elevated inflation.
The latest figures show the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge, hovering near 2.8 percent—still notably above the long-term 2 percent target.
The central issue compounding the uncertainty, a phenomenon Powell famously likened to “driving in the fog,” is the lack of reliable economic indicators.
A recent government shutdown forced the cancellation of the critical October inflation report, leaving policymakers blind to the most recent price movements.
Compounding this, job gains have slowed dramatically, with the unemployment rate ticking up to its highest level since 2021.
With the next key data points delayed until late December or early January, the Fed is now facing a deeply divided committee on whether to execute another rate cut at the crucial December meeting.
Internal dissent is now running high within the Fed, splitting officials into two distinct camps.
The ‘doves,’ led by figures such as San Francisco Fed President Mary Daly, are arguing forcefully for a swift second cut to proactively protect the “vulnerable labor market,” prioritizing the employment mandate over the inflation target, which they believe will self-correct in 2026.
Conversely, the ‘hawks’ maintain that persistent inflation, now fuelled by a new round of trade tariffs that function as a continuous upward price shock, means cutting rates further would be irresponsible and risks prolonging the affordability crisis plaguing American consumers.
This division, rarely so explicit, means that the final decision in December rests almost entirely on Chair Powell’s judgment, keeping investors and analysts in perpetual limbo.
The reverberations of this monetary policy uncertainty are particularly acute for the United Kingdom.
The BoE’s Monetary Policy Committee (MPC) recently held its Bank Rate steady at 4 percent on November 6, facing its own structural challenges.
The U.S. rate cut places downward pressure on the dollar, leading to a comparative strengthening of the British Pound against the greenback.
While a stronger Pound can help moderate imported inflation by making foreign goods cheaper, it simultaneously makes UK exports more expensive, dealing a further blow to an already sluggish domestic economy.
Financial experts in London-UK are closely monitoring the forthcoming UK budget plan, as markets await clarity on how Chancellor of the Exchequer will address the multi-billion-pound gap.
Any move to raise taxes or cut spending dramatically would weigh heavily on consumer sentiment and economic growth. The perceived weakness in the U.S. economy, coupled with the Fed’s proactive easing, creates a policy dilemma for the BoE:
it cannot afford to ignore the global easing trend, yet UK inflation, currently above target, and domestic economic fragility require a cautious approach.
The actions of Powell’s Fed are therefore not just a domestic issue but a primary determinant of the global financial conditions, amplifying risk in every major capital, including London, as the year draws to a close.
Headline Points
Fed Rate Cut:
The U.S. Federal Reserve cut its key interest rate by 0.25 percentage points in late October (to 3-3/4% to 4%) due to rising “downside risks to employment.”
The Data Crisis:
Chair Jerome Powell stated the Fed is “driving in the fog” after a government shutdown cancelled the official October inflation report, heightening uncertainty.
Divided Committee:
The FOMC is split over a potential December rate cut, with some officials arguing for immediate action to protect the labor market, while others warn of prolonging inflation, currently around 2.8-3.0%.
Global Impact:
The Fed’s policy shift and the resulting weaker dollar are increasing exchange rate volatility and directly influencing the policy decisions of other central banks, including the Bank of England.
UK Challenge :
The BoE held its rate at 4% but must now manage the pressure of global easing against the backdrop of a weak domestic economy and high-stakes budget decisions.
