Powell called for a halt to interest rate cuts at the end of October, but a month later, the data gave him a resounding slap in the face. The November non-farm payroll data was released—only 64,000 new jobs were added, while the market expected at least double that. The unemployment rate surged to 4.6%, a four-year high. Additionally, the October data was revised down by 105,000, and this round of "combination punches" completely disrupted the market's judgment on the Fed's next move.

In short, the Fed is now caught in a dilemma. On one hand, the job market is clearly weakening, while on the other hand, inflation needs to be brought down. Powell has previously insisted on not cutting interest rates, and his core concern is quite simple— the inflation rate is still stuck at 2.8%, which is a considerable distance from the 2% target. The core Personal Consumption Expenditures (PCE) number is a hurdle in his mind. Although the Fed did cut rates once in December, bringing the funds rate down to 3.5%-3.75%, Powell immediately poured cold water on the situation, stating that tariffs could exert persistent pressure on inflation, implying not to expect monetary easing to come too quickly.

Interestingly, there is also a split within the Fed. Out of the 12 voting members, 3 voted against, and two of them even argued that rates should be held steady for now. This kind of divergence actually reflects the real anxieties of the decision-making body — should they be concerned about employment data, or should they continue to defend the inflation line? The answer is obviously not that simple.