Powell Is Playing Catch Up Again

Jay Powell’s latest comments in Philadelphia confirm what investors have long suspected: the Federal Reserve is once again behind the curve. 

The central bank is now signaling that another rate cut is coming before the month is out, and it feels uncomfortably like déjà vu.

Powell acknowledged this week that “downside risks to employment have risen,” an admission that the US labor market is finally bending under pressure. 

Hiring is slowing, job openings are shrinking, and households’ confidence about finding work is slipping. ADP’s latest data show that US companies shed 32,000 jobs in September. It’s a sobering figure for an economy that only a year ago was hailed as unstoppable.

Markets were quick to react. The S&P 500 recovered from early losses to close 0.3% higher in New York, as traders moved to price in another quarter-point cut at the Federal Open Market Committee meeting on October 28–29. 

It would be the second consecutive reduction after last month’s move to bring the federal funds rate down to 4–4.25%, ending the longest pause in easing since 2019.

Powell’s words matter because they point to a familiar pattern. He has been late at almost every major turning point of his tenure. In 2018, the Fed raised rates too far for too long, only to reverse course months later when markets slumped. 

In 2021, officials insisted inflation would prove “transitory” even as prices surged, forcing an eventual policy overcorrection that became the most aggressive tightening cycle in four decades. Now, in 2025, the Fed is once again lagging behind a rapidly changing economy.

It is as though the central bank waits until the evidence is overwhelming before acting, and by that point, the economy has already lost momentum. Powell is reacting to conditions that markets, businesses, and investors have been signaling for months.

It is particularly striking that these signs of weakness have emerged under a self-proclaimed business-friendly administration. After four years of steady expansion, tens of thousands of jobs are now being lost every month. 

Tariffs, higher borrowing costs, and political unpredictability have combined to stall hiring and dent confidence. Small businesses are struggling with tighter financing and rising input costs. Consumer sentiment is weakening—the American labor market, once the envy of the world, is showing strain.

Powell’s shift in tone—from inflation vigilance to employment anxiety—marks a new phase. The narrative has flipped. The Fed now faces the opposite problem: an economy slowing faster than policy can adjust. Every delay reduces the effectiveness of its eventual response.

This latest pivot underlines a broader truth about monetary policy in this cycle: it has been consistently reactive. 

Markets move first, then the Fed follows. That undermines confidence. Investors crave clarity and leadership from the central bank. Instead, they are left interpreting speeches for hints of hesitation or fear.

The immediate challenge for Powell is credibility. Each late response chips away at trust. The Fed’s mandate requires balancing full employment and price stability, yet it has repeatedly underestimated the speed at which either can deteriorate. When policy misjudgment becomes habitual, the cost of restoring equilibrium rises each time.

Yet within that uncertainty, opportunity emerges. When rates begin to fall again, liquidity returns to the system, and capital starts seeking yield. The next phase of this market cycle will reward those who act early and position intelligently. 

Lower yields tend to favour high-quality equities, particularly those with solid balance sheets, strong cash flow, and exposure to technology, infrastructure, and innovation. Global diversification also becomes more attractive as the dollar adjusts to shifting rate expectations.

This is not the time to sit still. Investors who anticipate the policy turn, rather than waiting for confirmation, will define the next growth wave. The easing cycle that is about to begin will not be smooth, but it will open new avenues for returns in sectors that thrive on lower financing costs and renewed risk appetite.

Of course, rate cuts alone cannot fix deeper structural problems. Tariff policy, fiscal expansion, and domestic political uncertainty continue to weigh on corporate decision-making. The Fed can cushion the impact, but it cannot rebuild confidence on its own. Monetary policy can buy time. It cannot buy stability.

Still, as a new round of rate reductions approaches, investors must decide whether to treat them as a warning or an opportunity. I believe the latter. 

Policy lags, but markets anticipate. While the Fed once again plays catch-up, those who read the cycle correctly and position early will be the ones who gain the most.

Powell has a chance later this month to show that he can finally lead rather than follow. Whether he seizes it will determine not just the trajectory of the US economy, but the confidence of investors worldwide.