Analysis of MarketWatch’s ‘Jerome Powell Was Right All Along’ Article and Market Implications

On December 23, 2025, MarketWatch published an article titled “Jerome Powell was right all along” arguing that Federal Reserve Chair Jerome Powell’s cautious approach to interest rate cuts was correct. The article claims that if the president’s push for more aggressive rate cuts had been adopted, inflation would be rising again, the economy would be overheating, and the Fed would have to reverse course by raising rates [1].

Market data from December 23 shows that major U.S. indices reacted positively to the article and the underlying policy context, with the S&P 500 (0.54%), NASDAQ Composite (0.66%), and Dow Jones Industrial Average (0.25%) all closing higher, indicating investor confidence in Powell’s cautious stance. Trading volume was high across indices, particularly the NASDAQ at 6.66 billion shares [0].

Key economic and policy data relevant to the article’s argument include:

• Inflation
  : Consumer Price Index (CPI) at 3% and the Fed’s preferred Personal Consumption Expenditures (PCE) measure at 2.7%, both still above the central bank’s 2% target [0].
• Fed Policy
  : The Fed cut the federal funds rate by 0.25% in December 2025 (the third cut of the year), bringing the target range to 3.5%-3.75%. The decision had three dissenting votes, marking internal division over future policy direction [0].
• Economic Growth
  : The U.S. economy grew 4.3% annually in the third quarter of 2025, exceeding expectations and showing strong underlying momentum [0].
• Political Context
  : The president has been pushing for faster rate cuts, with White House economic advisor Kevin Hassett (a leading candidate to succeed Powell) criticizing the Fed for being “behind the curve” on rate cuts [0].

1. Market Alignment with Powell’s Stance
   : The positive market reaction on December 23 suggests that investors support Powell’s cautious approach, which prioritizes bringing inflation down to the 2% target over immediate rate cuts to boost growth. This aligns with the article’s core argument that aggressive cuts would risk reflation.
2. Fed Policy Division
   : The three dissents in the December rate cut decision highlight uncertainty within the Fed about balancing inflation concerns with economic growth. This division could lead to market volatility if the policy stance shifts unexpectedly in response to changing economic conditions.
3. Political-Economic Tension
   : The ongoing conflict between the administration’s push for faster rate cuts and the Fed’s inflation mandate creates a layer of uncertainty. This tension could escalate if the president attempts to influence Fed policy directly or replaces Powell with a more dovish chair, potentially disrupting the Fed’s independence.

• Fed Policy Volatility
  : Internal division at the Fed could lead to sudden shifts in rate policy, causing market volatility as investors adjust their expectations [0].
• Leadership Change Risk
  : Replacing Powell with a more dovish Fed chair could increase inflationary pressures, particularly given the already strong economic growth. This could force the Fed to reverse course later, leading to market disruptions [0].
• Inflation Persistence
  : If inflation fails to cool to the 2% target, the Fed may be forced to raise rates again, which would negatively impact interest-sensitive sectors and overall market sentiment [0].

• Strong Economic Growth
  : The 4.3% Q3 GDP growth indicates a robust economy, which could support market stability if inflation continues to decline gradually. This growth provides a buffer against potential economic shocks [0].
• Credibility of Fed’s Mandate
  : Powell’s commitment to the 2% inflation target could enhance the Fed’s long-term credibility, supporting investor confidence in the central bank’s policy decisions [0].

• On December 23, 2025, MarketWatch published an article arguing Powell’s cautious rate cut approach was correct, contrasting with the administration’s push for faster cuts.
• U.S. markets reacted positively, with major indices closing higher on December 23, reflecting investor confidence in Powell’s policy.
• Inflation remains above the Fed’s 2% target, GDP growth is strong, and the Fed recently cut rates with three dissenting votes.
• Risks include Fed policy division, leadership change, and inflation persistence, while opportunities stem from strong economic growth and the Fed’s credibility.