Deutsche Bank-Fed Watcher Powells Fire on the Mountain-117446715

2025 16:44:09 GMT2025 16:44:09 GMTResearchDeutsche Bankamy.yang@db.comAmy Yang | (+1) 212 250 9959 | amy.yang@db.comAugust 25, 2025IMPORTANT RESEARCH DISCLOSURES AND ANALYST CERTIFICATIONS LOCATED IN APPENDIX 1. UNTIL 19th MARCH 2021 INCOMPLETE DISCLOSURE INFORMATION MAY HAVE BEEN DISPLAYED, PLEASE SEE APPENDIX 1 FOR FURTHER DETAILS.Fed Watcher: Powell’s Fire on the MountainDeutsche BankResearchAmy YangEconomist(+1) 212 250 9959 | amy.yang@db.comMatthew LuzzettiChief US Economist(+1) 212 250 6161 | matthew.luzzetti@db.comBrett RyanSenior Economist(+1) 212 250 6294 | brett.ryan@db.comJustin WeidnerEconomist(+1) 212 469 1679 | justin-s.weidner@db.com Avik ChattopadhyayResearch Associateavik-a.chattopadhyay@db.comAugust 25, 2025ResearchDeutsche Bankamy.yang@db.comAmy Yang | (+1) 212 250 9959 | amy.yang@db.comAugust 25, 2025DB Fed Watcher: Powell’s Fire on the Mountain2Fedspeak Who**TakeawaysBias*Powell [3] (08/22)▪ Balance of risks appeared shifting, might warrant policy adjustment▪ Slowing job growth did not open up a large margin of slack ▪ Labor market in a curious kind of balance, with rising downside risks that if materialized, might see sharply higher layoffs and rapidly rising unemployment▪ Tariff’s price impact clearly visible, will accumulate over coming months▪ Reasonable baseline for short-lived, one-time price impacts from tariffs. One-time not equal to “at once”. Effects can take time to unfold▪ Persistent impact could come from adverse wage-inflation dynamics or unanchored inflation expectation. Neither scenario seems likely▪ Stable labor market allows Fed to proceed carefully in adjusting rates▪ Policy modestly restrictive▪ Removed ELB, inflation make-up strategy and short-fall languages around employment from consensus statementGoolsbee [1] (08/21)▪ Sept. meeting is “live”. Mixed data▪ Rising services inflation is “dangerous” sign. Hope it would just be a blipMusalem [4] (08/22)▪ Need more data before supporting a Sept. rate cut. Inflation close to 3%▪ See risks to labor market, though not yet realizedFedspeak, continuedWho**TakeawaysBias*Collins [3] (08/22)▪ Can cut in Sept. if labor market continued to soften▪ Sept. meeting not a done deal. A range of outcomes on the table▪ Policy is modestly restrictive▪ See elevated inflation over next couple of quarters, until early ’26. Limiting how much Fed can ease policy. Stay vigilant▪ Can’t wait for full clarity on inflation to consider rate cuts▪ Risks on both mandates in balanceMinutes (08/20)▪ A majority of participants judged upside risks to inflation as greater than downside risks to employment▪ Several saw risks as roughly balanced, a couple saw downside risks to labor market as more salient▪ Many officials noted that it would take time for the full effects to be felt▪ A few saw transitory tariff-induced inflation, while a few saw stubbornly elevated inflation and difficulty in disentangling temporary rise ▪ Several saw above-target inflation over extended periods pose risk to infla