September will not be remembered for the size of a rate cut.
It will be remembered as the meeting where the Fed’s credibility began to fracture.
The Fork
Powell has only two choices, and both undermine the institution he leads.
If he cuts
– Markets get a short burst of relief
– The independence premium erodes
– The Fed looks captured by political pressure
If he holds
– Markets absorb the shock
– Powell still takes the blame
– The Fed appears cornered and defensive
The Trap Mechanics
This box did not emerge on its own.
Trump has attacked Powell for years.
Bessent has given that instinct structure. Treasury now runs like a macro fund: tariffs function as carry, deficits supply liquidity, and trade negotiations serve as narrative management.
The result is unavoidable.
Whichever way Powell moves, markets stop looking to the Fed for the anchor.
They start pricing fiscal and trade operations instead.
Why It Matters
Safe-haven premiums depend on independence. Once credibility cracks, U.S. assets get repriced. That process does not unfold in a single day — it’s a structural bleed.
Compression Clarity
– This is not a rate dilemma
– It is a credibility dilemma
– Powell has no path that strengthens the Fed
Timestamp Locked
Logged: August 26, 2025 — before consensus calls this “the Fed boxed in.”