Federal Reserve Chair Throws Cold Water On Fed Rate Cut Hopes

Federal Reserve Chair Jerome Powell told reporters that another rate cut in December is “not a foregone conclusion – far from it.”

Those few words cooled Wall Street’s expectations in a hurry. 

As Fox Business host Brian Brenberg opened on The Big Money Show, Powell also revealed deep divisions on the Fed board about where to go next – even as the central bank trimmed its policy rate this week, dropping benchmark rates below 4% for the first time since 2022.

That mix of a cut now and ambiguity later set up a spirited panel. Brenberg and co-host Jackie DeAngelis pressed Larry Kudlow, Lydia Hu, and investor Jonathan Hoenig on what markets should really take from Powell’s message – and what happens if President Donald Trump picks a new Fed chair soon.

In my view, Powell’s reminding everyone he still holds the steering wheel. And he’s not promising a destination.

Kudlow: Cut Carefully, Don’t Fear Growth

Larry Kudlow took the opening drive.

He didn’t slam Powell for hedging on December. In Kudlow’s view, the decision has to wait on data through September, October, and November. Growth, he argued, is not the enemy. 

“The Fed has a phobia about growth,” he quipped, adding that strong output does not cause inflation.

But Kudlow also pointed to the last CPI run rate—about 3.6% annualized over three months, with 12-month core and headline near 3.0%. With a 2% target still unmet, he wasn’t “crazed” about Powell taking it slow.

He flagged easing pressures in energy, gasoline, and shelter. If those trends hold into year-end, he thinks “it may be time to cut again.” That’s not a promise – more like a conditional green light.

I think Kudlow’s framing is the most credible of the bunch: don’t fetishize growth as inflationary, but don’t pretend 2% is already in the bag.

DeAngelis: A Flex From The Chair

Jackie DeAngelis focused on the message discipline.

Powell didn’t need to douse markets right now, she argued. He could have let the data speak later. 

By choosing to emphasize uncertainty, she thinks he was “flexing his power”—reminding markets and the White House that he’s in charge as chatter swirls about his potential replacement.

Kudlow half-demurred, suggesting Powell’s comment might have been a quick response to a question. But the effect was unmistakable: equities reacted, yields wobbled, and the December probabilities reset.

This is classic Powell. He tries to be data-dependent but ends up highly market-reactive. The irony is that talking tough to avoid being market-led… still moves markets.

The “Next Fed Chair” Sweepstakes

Brenberg pushed Kudlow on succession politics as President Trump reportedly narrows his shortlist.

Kudlow shared the results of an informal social poll he’s been running on X and Instagram: former Fed Governor Kevin Warsh is leading among the names floated. 

Kudlow said Warsh isn’t a “dove,” favors a strong dollar, low tax rates, and deregulation—what Kudlow calls the supply-side playbook. Brenberg asked whether Warsh would work well with Trump. Kudlow’s answer: “Yes.”

Kudlow then pivoted to a critique of the Fed’s balance sheet. At roughly $6.5 trillion now, he said, it remains far too large compared with sub-$1 trillion levels a decade and a half ago. 

He believes the Fed made “a mistake” by not running it down further, arguing that shrinking the monetary base is still a needed tool in the anti-inflation kit.

Here Kudlow is channeling classic monetarist instincts. Whether balance-sheet runoff carries the same punch it used to is up for debate – but his point about leaving too much liquidity sloshing around resonates with many investors.

Hoenig: Rates Alone Won’t Unlock Growth

Investor Jonathan Hoenig homed in on what actually drives expansion.

With policy rates now sub-4% for the first time in three years, he asked Kudlow how much deregulation matters alongside lower borrowing costs. 

Citing President Carter’s deregulatory efforts that set the stage for the Reagan boom, Hoenig argued that structural reform – not quarter-point tinkering – creates durable growth.

Kudlow agreed on the substance, highlighting the new fiscal package he calls a “one big, beautiful bill,” which he framed as pro-business and pro-jobs. 

He laid out the supply-side chain reaction: lower taxes plus deregulation equals more investment and production, which helps cool prices even as it boosts employment.

On that, the panel found rare consensus. Monetary policy can avoid mistakes, but it doesn’t build factories.

My take: this is the most important sentence of the segment – rates are the headline; rules and taxes are the storyline. If fiscal and regulatory gears mesh, the Fed can stay in the background.

Jobs, AI Layoffs, And The Fed’s Blind Spot

Lydia Hu sharpened the labor-market question.

She pointed to murky hiring data and a string of high-profile layoff announcements – AI-linked cuts from tech giants like Amazon, broader downsizing at firms like UPS – and asked whether the jobs picture is deteriorating faster than official reports capture.

Kudlow didn’t dismiss the risk. Private payroll growth had been slowing even before recent disruptions, he said. But he downplayed the idea that a “quarter point here or there” would decide hiring. 

If policymakers want new businesses to hire, Kudlow argued, the real levers are immediate expensing, faster depreciation, lower corporate rates, and a lighter regulatory touch—so companies put AI and quantum tools to work productively.

This is the core policy clash in 2025: should the Fed be the main actor on growth risk, or should Congress and the White House take the wheel with targeted fiscal and regulatory changes? 

Hu is right that the job data are laggy and fuzzy. That alone argues for humility from the Fed – and precision from lawmakers.

The Policy Mix That Actually Works

Strip away the studio heat, and a practical blueprint emerges from the panel’s comments.

From Kudlow: don’t fear growth; keep grinding inflation down; keep shrinking the balance sheet; focus on supply-side drivers. 

From Hoenig: add durable deregulation. From DeAngelis: mind the messaging—don’t spook investors without a purpose. From Hu: watch the jobs tape between the lines, especially the AI ripple effects.

My view: if inflation momentum continues to cool in energy and shelter, the case for one more cut by year-end strengthens – but only if the Fed simultaneously signals commitment to balance-sheet runoff and a steady 2% target. 

That’s a credible-dove posture: easier at the margin, anchored overall.

Meanwhile, if the administration and Congress fast-track full expensing, streamline permits, and cut compliance costs for startups, you get the growth without reigniting inflation. More supply, not just more demand.

Markets Heard The Message – Now What?

Powell’s caution resets expectations.

Equities will key off every CPI, PCE, and jobs print between now and December. Rates markets will keep pricing a coin-flip for the next meeting and then lean heavier once shelter inflation confirms a downtrend or surprises the other way.

Credit spreads and small-cap performance will tell the real tale. If financing costs ease and regulation lightens even a bit, small and mid-sized firms should lead. If not, mega-caps keep carrying the water while the rest of the economy grinds.

As for who sits in Powell’s chair next, the panel’s Warsh talk matters because it hints at a return to “tight money, low taxes, strong dollar” orthodoxy. Markets would see that as anti-inflation credibility—so long as growth policy does the heavy lifting.

On The Big Money Show, Brian Brenberg and Jackie DeAngelis put a spotlight on Powell’s unsentimental reminder: more rate cuts are not guaranteed.

Larry Kudlow argued the Fed shouldn’t mistake growth for inflation, but he wants the balance sheet lower and the supply side stronger. Jonathan Hoenig said deregulation matters as much as rate levels. Lydia Hu flagged an uncertain jobs picture distorted by AI-era layoffs. 

And the shadow question – who replaces Powell if he’s out – hung over the table, with Kevin Warsh floating to the top of Kudlow’s informal poll.

My closing take is simple. Inflation is cooler, not conquered. Growth is decent, not dangerous. The smart path is modest monetary patience paired with aggressive pro-investment policy. 

Do that, and by December the Fed won’t need to “flex.” The data will make the case for it.

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