TOKYO \u2013 Asian markets have an ace in the hole as a tumultuous 2025 comes to a close: Jerome Powell.<\/p>\n
On Thursday, the region\u2019s stock bourses rose again, extending the week\u2019s global rally, amid widespread expectations that US Federal Reserve Chair Powell and his fellow board members will cut rates on December 10.<\/p>\n
The Fed\u2019s announcement of a third successive easing move, the thinking goes, would allay fears that valuations are overstretched amid the AI boom. Yet is Asia\u2019s faith in the so-called \u201cPowell put<\/a>\u201d overdone?<\/p>\n It may indeed be given the unusually wide range of opinions on the economy among Fed officials \u2013 and extreme uncertainty about what lies ahead.<\/p>\n The reference here is to a phenomenon that dates back to the Alan Greenspan-era Fed. In the late 1990s and early 2000s, then-Fed head Greenspan routinely stepped in to rescue markets.<\/p>\n It\u00a0was the \u201cGreenspan put\u201d that saved the day amid the 1997-98 Asian financial crisis, the 1998 Russian default\u00a0and the tech stock crash at the start of the new millennium.<\/p>\n Since then, each successive Fed leader has had their \u201cput\u201d moment. Ben Bernanke\u2019s\u00a02006-2014 tenure<\/a>\u00a0even saw the Fed go the quantitative easing route. His successor, Janet Yellen, found herself fending off the so-called \u201cbond vigilantes<\/a>\u201d during her tenure as chair from 2014 to 2019. And now, it\u2019s the \u201cPowell put\u201d that has Asia in a whirl.<\/p>\n Global investors\u2019 perception that Powell has their back dates to 2019, when, in just a few months\u2019 time, he pivoted from monetary hawk to dove. The optics weren\u2019t great, as many worried Powell\u2019s change of heart was related to US President Donald Trump\u2019s demands for lower rates.<\/p>\n In 2025, Trump went all-in on intimidating the Powell Fed, including firing the Fed chair he picked in his first term in 2018. Team Trump<\/a> has also gone after a Fed governor on vague accusations of mortgage fraud. The unprecedented intensity of political meddling confronting the Powell Fed will\u00a0color any decision it makes on rates over the next few weeks.<\/p>\n There are valid worries that the US job market is slowing. But there are equally valid concerns that, with US inflation running at 3% and Trump\u2019s tariffs putting upward pressure on global prices, a rate cut now could do more harm than good. That\u2019s especially so if bond investors push up long-term yields amid inflation fears.<\/p>\n Such a dynamic would deaden the benefits of Fed easing<\/a>. Worse, arguably, it would suggest that a Trumpifed Fed has lost global credibility. This could have dramatic implications for the US dollar and US Treasury securities at the core of the global financial system.<\/p>\n For now, though, Asian markets are betting the Powell put will delight global investors in the next two weeks and beyond as markets price in even more moves into early 2026 \u2014 just as Trump desires.<\/p>\n Speaking in Santiago, Chile, on November 21, New York Fed President John Williams signaled that recent data, including employment trends, pave the way for more rate cuts.<\/p>\n \u201cI view monetary policy as being modestly restrictive, although somewhat less so than before our recent actions,\u201d he said. \u201cTherefore, I still see room for a further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral, thereby\u00a0maintaining the balance<\/a>\u00a0between the achievement of our two goals.\u201d<\/p>\n That\u2019s music to Trump\u2019s ears, of course. And, perhaps, officials at the People\u2019s Bank of China in Beijing, too.<\/p>\n The more the Fed eases, the more latitude the PBOC might have to cut rates to address China\u2019s deflation. If the PBOC were to cut rates now, the floor could fall out from under the yuan, angering Trump\u2019s White House.<\/p>\n For the Bank of Japan, Fed rate cuts could tame the yen\u2019s weakness. Thanks to a weak exchange rate, Japan is importing inflation at an alarming rate. Risks cut both ways, of course. In the July-September period, the Japanese economy shrank 1.8%, much steeper than expected.<\/p>\n Given the contraction, it \u201cwould be misguided for the BOJ to decide to raise interest rates\u201d in December, says Credit Agricole economist Takuji Aida.<\/p>\n In the days since then, San Francisco Fed President Mary Daly<\/a> said she sees room \u201cfor a further adjustment in the near term.\u201d Though Daley isn\u2019t currently a voting member of the Federal Open Market Committee, she and Powell are often of similar minds.<\/p>\n As economist Joseph Gagnon at the Peterson Institute for International Economics think tank explains, both Williams and Daly \u201ccame out in pretty clear support of a rate cut.\u201d Both are centrists often aligned with Trump, and their comments make things less \u201cup in the air.\u201d<\/p>\n Evercore ISI economist Krishna Guha adds that \u201cat a minimum, Williams\u2019 intervention signals<\/a> that the Fed leadership has not given up on a cut. But we think it is reasonable, though not certain, to read it as more than that.\u201d<\/p>\n Dallas Fed President\u00a0Lorie Logan speaks for many when she says that \u201cwith two rate cuts now in place, I\u2019d find it difficult to cut rates<\/a> again in December unless there is clear evidence that inflation will fall faster than expected or that the labor market will cool more rapidly.\u201d<\/p>\n Though not currently a voting FOMC member, Logan\u2019s point is worth considering in the context of the central bank\u2019s dual mandate. The first half \u2014 full employment \u2014 had gotten far more attention this year than the second \u2014 price stability. The risk is that 3% annual price increases become ingrained.<\/p>\n \u201cThe Fed\u00a0is between a rock and a hard place,\u201d says University of Maryland economist Peter Morici. \u201cIf it stands pat, it lets a tough jobs market fester. If it goes through a rate-cutting cycle, it risks making 3% inflation the new normal.\u201d<\/p>\n