JEROME POWELL : YOUR FINAL CHANCE

US CPI just dropped to 2.4% vs 2.5% expected.
Core CPI came in at 2.5%, matching expectations.
On the surface? Normal.
Under the surface?
This is the lowest CPI since April 2025.
Core inflation is now at its lowest level in almost 5 years.
That takes us back to lockdown-era levels.
While the Fed keeps warning about inflation heating up…
The data is quietly moving the other way.
And something else is breaking.
👉 INFLATION IS MOVING DOWN, NOT UP
The Fed has stayed hawkish longer than most expected.
Rates high.
Cuts delayed.
Messaging firm.
But CPI is trending lower. Not higher.
Core inflation sitting at a five-year low is not what an overheating economy looks like. It looks like demand is slowing.
When prices cool this steadily, it usually means consumers are pulling back and businesses are losing pricing power.
That is not inflation pressure.
That is economic fatigue.
In 2020 and 2021, the Fed stayed dovish too long and inflation exploded.
This time, they may be doing the opposite by keeping policy tight even as price pressures ease.
👉 THE REAL WEAKNESS IS SHOWING ELSEWHERE
Look beyond CPI.
Credit card delinquencies are rising sharply. That means households are struggling to service debt.
Corporate bankruptcies are back near 2008 crisis levels. That is not normal.
The labor market is clearly softening. Job growth is slowing and layoffs are picking up in certain sectors.
This combination is dangerous because falling inflation alongside rising stress signals a demand slowdown.
That is where the conversation shifts from inflation to deflation risk.
Deflation is not just lower prices. It is falling demand, shrinking revenues, weaker hiring, and pressure across balance sheets.
If spending freezes, businesses cut costs. If businesses cut costs, jobs get hit. If jobs get hit, spending slows even more.
That cycle is much harder to control.
👉 THE FED IS NOW IN A POLICY CORNER
If Powell cuts rates quickly, it signals that tightening went too far.
If he does nothing, the pressure builds.
That is the situation.
The Fed spent the last two years focused on bringing inflation down. They succeeded.
But the economy may now be responding to that tightening with a lag.
Markets can sense this shift. Rate cut expectations are quietly moving forward. Bond markets are reacting.
The longer the Fed waits to adjust, the more aggressive the pivot may need to be later.
And aggressive pivots usually come after damage has already been done.
✦ BOTTOM LINE :
In 2020, the Fed was slow to tighten.
In 2026, they may be slow to ease.
That is the concern.
When CPI hits multi-year lows while bankruptcies rise and consumers struggle with debt, the narrative changes quickly.