The September 16 - 17 meeting of the Federal Open Market Committee contained two significant developments—one in personalities, the other in policy direction. Together, they will shape markets well beyond this week.
First, the personnel drama. Stephen Miran, President Donald Trump’s preferred candidate for the Federal Reserve Board, was confirmed by the Senate Tuesday morning just in time to walk into FOMC discussions later that same day. An Appeals Court turned down Trump’s request to remove Governor Lisa Cook “for cause,” leaving her very much in place at the table. The President has since asked the Supreme Court to allow him to fire her from the Board.
The result was an awkward but revealing two-day session: Dr. Miran pressed for a 50 basis point cut in the Federal Funds rate but found himself isolated. Even Governors Christopher Waller and Michelle Bowman—who had previously dissented in favor of a July rate reduction and are considered candidates to succeed Jerome Powell as Chairman — chose to go with the 25 bp cut supported by the majority.
Powell, in his post-meeting press conference, tried to frame the decision as nothing more than a “risk-management cut.” In a not-too-subtle rebuke of both Miran and Trump, he added that an FOMC voter can only affect policy by being “incredibly persuasive.” Translation: Miran, for all his political backing, failed to sway colleagues. His lone dissent signals that he will continue to argue for jumbo cuts at future meetings. Miran confirmed in a CNBC interview yesterday that he was the outlier in the “dot plot” that showed one voter forecasting 1 1/4 percentage points of additional rate reductions by year-end. Despite all this, the institution remains resistant — for now.
The second takeaway is about where all this leads. I have written in SriKonomics that lowering short-term rates while tariff-driven inflation continues to accelerate will almost certainly steepen the yield curve. That means higher mortgage costs for households and a swelling interest bill for the Treasury. At some point, this fiscal pressure collides with political expediency. And now we have the roadmap for how.
During his Senate testimony, Miran spoke of a “third mandate” for the Fed—beyond managing inflation and employment—namely, to ensure “moderate long-term interest rates.” The only way to operationalize such a mandate is through Yield Curve Control: fixing Treasury yields at a politically desired level by buying unlimited amounts of government debt and flooding the market with liquidity.
YCC ended disastrously in 1951 after a decade of implementation, with runaway inflation and the Fed’s independence in tatters. To revive it today, at a moment when debt issuance is surging under Trump’s “Big Beautiful Bill” and tariffs are pushing prices higher, would turbocharge both inflation and the Fed’s balance sheet.
The Powell Fed has not yet crossed this Rubicon. But Miran’s presence ensures that YCC will be back on the table as a policy debate in coming months. That may be the most consequential outcome of this week’s meeting—not the 25bp cut itself, but laying the groundwork for a structural change in how the United States finances its debt.
Equity markets have cheered the 25bp cut, treating it as the opening salvo of an easing cycle despite Powell’s careful language that this will not be the first reduction of many. The S&P 500 gained 1.5% on Wednesday, with rate-sensitive sectors such as housing and financials leading the charge. The Russell 2000 and 3000 indexes hit record highs on Thursday. Investors chose to focus less on Powell’s warnings and more on the presence of new doves like Miran, interpreting his dissent as proof that the White House will keep pressuring the Fed for deeper cuts. The rally may prove fleeting if inflation worsens, but for now, risk assets are celebrating.
What is the takeaway? The September FOMC meeting was less about the size of the rate cut and more about the direction of policy. A new Trump-aligned Governor is already agitating for jumbo cuts, while Powell is trying to preserve a veneer of institutional restraint. The result is a central bank caught between political pressure and rising inflation.
For investors, this translates to a heightened risk of curve steepening, dollar weakness, and policy volatility in the months ahead. Whether the near-term market reaction comes through higher yields, an equity rally, or dollar depreciation, the longer-term trajectory points to one destination: a Federal Reserve that may be maneuvered into Yield Curve Control. That outcome would mark a profound shift in U.S. monetary policy — one that investors must begin to price in.
Dr. Komal Sri-Kumar
President, Sri-Kumar Global Strategies, Inc.
Santa Monica, California
www.srikumarglobal.com
@SriKGlobal
September 20, 2025
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