Powell Signals Risk Management
Fed Sentiment Index drops to dovish territory ahead of key speeches
The FXStreet Fed Sentiment Index fell below 90.00 for the first time since November, signaling a clear dovish tilt in the Federal Reserve’s tone. The index dropped to 82.74 following the September policy meeting, its lowest level since early November.
The Federal Reserve (Fed) cut the policy rate by 25 basis points to the 4.00%–4.25% range, as widely anticipated. The updated Summary of Economic Projections (SEP), also known as the dot-plot, showed expectations for an additional 50 bps of cuts in 2025, 25 bps in 2026, and 25 bps in 2027.
At the post-meeting press conference, Fed Chair Jerome Powell described the decision as a “risk management cut,” noting that risks to the employment mandate have grown. He also warned that tariff-driven price pressures are expected to persist this year and next.
Newly appointed Fed policymaker Stephen Miran revealed that he voted for a 50 bps cut, arguing that keeping policy restrictive for too long increases risks to the labor market. On a more neutral note, San Francisco Fed President Mary Daly said the rate cut was aimed at supporting a weakening labor market, pointing to clear signs of economic softening over the past year.
Despite a slight recovery, the Fed Sentiment Index stayed in dovish territory at 86.23, reflecting the central bank’s cautious stance.
Markets are now focused on upcoming speeches from several Fed officials, including:
These remarks are expected to provide further clarity on the Fed’s policy outlook.
Meanwhile, the Supreme Court of the United States has set November 5 as the date for hearings on the legality of sweeping global tariffs imposed by the President of the United States. A lower court previously ruled that the President had overstepped authority in imposing most of the tariffs under emergency powers. The tariffs, however, remain in effect during the appeal process, keeping investors on edge.