Being the Federal Reserve chair has to feel a little like walking a tightrope while juggling chainsaws. Too far one way, and the economy slips into recession. Too far the other way, and inflation roars back to life. Jerome Powell has been walking that rope for years now, and I’ll be honest—I’ve been impressed with how steady his footing has been. But here in 2025, the balancing act is getting harder.
Rates and the Labor Market
The Fed’s main lever is the federal funds rate—the short-term interest rate that affects everything from mortgages to car loans. Over the last few years, the Fed raised rates aggressively to slow inflation. It worked—prices are no longer climbing at the breakneck pace we saw in 2021–2022. But higher rates also cool down the job market. Right now, we’re seeing signs that hiring is slowing and wage growth is leveling off.
That’s where Powell’s dilemma comes in. The Fed wants to support a softening labor market—because too much weakness can lead to layoffs and stalled growth. But if they cut rates too quickly, they risk pouring fuel back on the inflation fire. It’s a delicate “Goldilocks” problem: not too hot, not too cold.
Why Independence Matters
Another thing worth highlighting: the importance of the Fed being independent. The Federal Reserve isn’t supposed to answer to politicians—on purpose. Imagine if every election year, rates were slashed just to juice the economy before voters hit the polls. That might feel good in the short run, but it would wreak havoc in the long run.
Independence allows the Fed to make unpopular but necessary decisions, like raising rates when nobody wants to pay more for a mortgage, or holding steady when political voices are shouting “cut now!” It’s not about pleasing Wall Street, Main Street, or Pennsylvania Avenue. It’s about the long-term health of the U.S. economy.
Where’s your focus?
As I look back over Powell’s tenure, I think he’s handled a historic run of challenges pretty well: a global pandemic, the highest inflation in four decades, and now a tricky slowdown in the job market. But the tightrope he’s walking is thinner than ever. The next few quarters will be telling.
In the meantime, it’s a good reminder for all of us: we can’t control interest rates, inflation, or the labor market. But we can control our own actions. That’s where our focus should stay—making wise decisions with the resources we’ve been entrusted with, no matter what the Fed is juggling this week.
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These are the opinions of Legacy Wealth Management, LLC and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Dan Funderburk is a Registered Representative offering securities through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Legacy Wealth Management, LLC and Cambridge are not affiliated. Cambridge does not offer tax advice. Copyright ©2025 Dan Funderburk. All Rights reserved. Commercial copying, duplication or reproduction is prohibited.
