The Grandmaster's Dilemma: How the Fed Became a Chess Player Without a Board
Monday is here. Netflix trades ex-split. Nvidia reports earnings Wednesday. The S&P 500 has recovered slightly. And somewhere in the Federal Reserve's marble temple on Constitution Avenue, Jerome Powell is staring at an economic chessboard with most of the pieces missing.
This is the human condition of modern central banking in 2025.
The Data Problem That Broke Everything
For weeks, we've been operating in what amounts to an information vacuum. The government shutdown didn't just steal our patience—it stole our vision. September's jobs report? Still waiting. October's inflation data? May never arrive. The monthly consumer spending figures that typically anchor Fed deliberations? Ghosted.
A month ago, markets were assigning a 95% probability of a December rate cut. As of Thursday afternoon, that probability had collapsed to 49.4%, essentially a coin toss.
This is not because anything dramatically changed in the economy itself. This is because Powell and his colleagues realized something terrifying: they don't actually know what's happening.
Powell acknowledged that the limited data could cause officials to proceed more cautiously, saying "There's a possibility that it would make sense to be more cautious about moving (on rates). I'm not committing to that, I'm just saying it's certainly a possibility that you would say 'we really can't see, so let's slow down.'"
Let that sink in. The most powerful central banker in the world is essentially saying: we might pause because we can't see. Not because the economy is bad or rates are wrong, but because the fog is too thick.
The Inflation Mirage
Here's where it gets interesting. If the labor market is genuinely weakening—and several major corporations have announced sweeping layoffs—then cutting rates might make sense. Support employment. Ease financial conditions. Classic crisis response.
But there's a problem: inflation isn't cooperating.
Some Fed officials worry about flying blind on data at a time when the most recent readings point to a softening labor market but inflation that, while ebbing slightly, is still considerably above the Fed's 2% target.
Tariffs are beginning to ripple through the system. Consumer prices on imported goods—furniture, toys, shoes—are visibly higher. Powell knows it. His colleagues know it. And they're split.
On one side: the doves who see weakening labor markets and want to cut. Stephen Miran, the Trump-appointed Fed governor, has now voted twice for half-point reductions instead of quarter-point moves. Michelle Bowman and Christopher Waller are willing to keep easing.
On the other side: the hawks. Jeffrey Schmid of Kansas City, Beth Hammack of Cleveland, and Beth Collins represent a hawkish bloc cautious about further cuts, with Collins reasoning that cutting rates more risks pushing inflation higher at a time when tariff impacts remain uncertain.
Powell sits in the middle, trying to build consensus on a problem that doesn't have a clear answer.
What This Means for the Market
Monday's opening will be nothing like the clarity traders crave. Risk appetite has perked up slightly as S&P 500 contracts gained 0.4% and Nasdaq 100 futures rose 0.6%, with Bitcoin climbing 1.7% after earlier wiping out its gains for the year.
But this rebound is fragile. It's not conviction—it's relief that the shutdown ended and we can at least start collecting data again.
Netflix will trade on a split-adjusted basis, starting around $111 after closing near $1,112 pre-split. Microsoft hosts its Ignite conference. And Nvidia's earnings Wednesday will likely become the most important economic data point of the week, which says something damning about where we are.
Nvidia is expected to report earnings on November 19, along with Target, Lowe's, and TJX Companies. But the real earnings that matter will be Nvidia's—because if the AI capex story stumbles, the whole rate-cut thesis collapses anyway.
The Dow has recently touched 48,000. Cyclicals are rallying because value investors smell opportunity. Tech is battered but not broken. Palantir sits above $170, Michael Burry's public shorts notwithstanding. Pfizer just bought Metsera for nearly $10 billion because someone has to believe in growth stories that don't revolve around AI infrastructure.
None of this changes what's actually happening: the Fed is flying blind, the market is pricing in maximum confusion, and December 9 is going to be must-watch television.
The Historical Echo
This reminds me of something. Not the panic of 2008, not the emergency cuts of March 2020. This is something quieter and more dangerous: a central bank that knows it's wrong but can't figure out the right direction.
In the early 1990s, Alan Greenspan faced a similar fog—weak labor market, uncertainty about inflation, incomplete data. He chose to cut aggressively. It helped. But that was before tariffs, before unprecedented government shutdowns, before central bank independence itself became a political football.
Powell's job is harder now. Not because the economy is worse, but because the terrain is more complex and the political pressure is more direct. Trump wants cuts. Powell has to balance the mandate. The hawks want inflation-first policy. The doves see job losses coming. And nobody knows what the actual state of the economy is.
What Happens Next
Watch Nvidia on Wednesday. Watch housing starts on November 19. Watch the Fed minutes on Wednesday afternoon—they'll be the first real window into how fractured the committee actually is.
December 9 will either bring a quarter-point cut (Powell's compromise), a hold (the hawkish view), or maybe even a signal that no more cuts are coming (the nuclear option for risk assets).
But here's the thing: whatever happens, it won't be based on a clear read of economic conditions. It will be based on Powell's best guess about what he can't see, on political calculation, and on committee management at a moment when the committee is genuinely split.
That's not how the Fed is supposed to operate. But that's the world we're in now.
Welcome back to the market, everybody. Hope you brought your fog lights.