Fed rate cut signals the end of monetary orthodoxy: U.S. labor market becomes the key economic compass amid political pressure

Fed Chair Jerome Powell announced on September 17 the first rate cut in the last 9 months by 0.25 points, which currently stands at 4-4.25%.

The Fed’s decision reflected Jerome Powell’s skillful balancing between political pressure from the Donald Trump administration and preserving the institutional integrity of the Federal Reserve System, which has become the key challenge for the American macroeconomy, which is experiencing a phase of structural turbulence.

For the first time in several years, the Fed openly recognizes the priority of labor market stability over fighting inflation, which means a shift in the paradigm of monetary policy and a review of traditional criteria for decision-making on the key rate.