Chances of a Fed put are low, given the uncertain economic picture

As uncertainty reigns, the Philly Fed manufacturing index fell to a multi-year low, but layoffs have slowed

article-image

Federal Reserve Chair Jerome Powell | Brookings Institution/"Jerome Powell" (CC license)

share

This is a segment from the Forward Guidance newsletter. To read full editions, subscribe.


In the world of macro, the FOMC roadshow has been sidelined as global markets and pundits are squarely focused on Trump’s trade policies and their impacts on the global economy. 

That creates a state of fragility with a bunch of crosscurrents. Economic activity is grinding to a halt as businesses have trouble making hiring and capital investment decisions without knowing what the outlook will be on tariffs. 

After some initial tariff frontrunning in January and February, the Philly Fed Manufacturing Index cratered to a multi-year low: 

Traditionally — as economic activity slows down — you would see a decrease in prices to rebalance economic equilibrium. However, with the looming concern of tariffs, we’re seeing a continued increase in the prices paid for goods (as measured in the Philly Fed report):

So that’s growth (economic activity) down, and prices up. That’s a nasty combination for central bankers to deal with. 

What makes the picture even messier is contrasting this with the other side of the Fed’s dual mandate — the labor market. Initial jobless claims (the highest frequency labor market datapoint we have) continue to signal no meaningful layoffs occurring in the economy right now:

To be fair, the labor market is pretty bad for those seeking a new job; but as long as you sit in your current job, there’s no meaningful layoff cycle to be seen right now. If the labor market continues to remain OK-ish as it appears in the current data, there’s no meaningful catalyst on that side of the mandate for the Fed to react dovishly to. 

We have a current framework of lower growth, a decent labor market, and higher prices (even if short-lived, a one-time price level increase from tariffs and not reflexive embedded inflation). This framework is forcing the Fed to continue to sit on its hands.

Fed Chair Jerome Powell took to the podium yesterday and further hit home on this messaging — to the dismay of bulls looking to get the wind in the sails of their struggling bags. An excerpt from his speech:

“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension. If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close.”

Where this nets us out is that the strike price for a Fed put is much lower than current pricing. Things would have to deteriorate meaningfully to wake up the Powell put.

And so we come full circle, where once again investors are at the whim of where Trump’s trade policies allow the dust to settle. Good luck out there; the Fed (for once) does not have your back.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

Nillion_DeSci_Report_Template.png

Research

Nillion’s Monad Integration is poised to catalyze the next phase of DeSci’s evolution by eliminating key privacy bottlenecks. This synergy allows researchers, institutions, and DAOs to exchange sensitive data and insights securely while managing governance and payments onchain.

article-image

Celebrating the wisdom of a diamond-handed Bitcoin Legend

article-image

With the success of RWAs and stablecoins, DePINs could onboard the next wave of crypto users

article-image

Is crypto straying too far from things of value?

article-image

Firedancer and Solana ETFs look less significant than before

article-image

The newly passed House bill amplifies that strategic pivot for the Trump administration, from attempting austerity to running the economy hot

article-image

Unable to secure further funding, the game cycled through three different blockchains and at least five different game engines since 2018