Analyst: Fed's Hawkish Pivot Tightens Powell's Rate Cut Room

BlockBeats News, May 25th: U.S. financial website Investinglive analyst Eamonn Sheridan pointed out that the minutes of the Federal Reserve's April meeting showed a significant change in the Fed's stance. The previous emphasis on reacting "flexibly and quickly" based on economic data has been replaced by new wording: persistently high inflation, combined with the uncertainty of the economic impact of the ongoing Iran conflict, may mean that policy needs to remain on hold for a longer period than previously expected.

The inflation situation faced by the new Chair Powell is not simply an energy issue. Officials noted that the high cost of fuel is gradually being transmitted to shipping rates, airfares, and fertilizer costs, spreading inflationary pressures to a wider range of areas. This transmission effect makes inflation more difficult to be seen as a transitory factor and gives hawkish officials a more sustainable rationale for advocating to maintain high interest rates or even hike.

The current market expectation is that if inflation fails to ease, the Fed may resume rate hikes at the end of 2026 or early 2027. Powell himself leans toward easing, but this stance sets up a potential clash with a visibly hardening committee; as Powell's leadership style gradually emerges, this dynamic could intensify the volatility of FOMC's internal communication.