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Fed can’t ignore the risk of higher inflation, Powell says

Federal Reserve Chair Jerome Powell said the Fed faces a “challenging situation” with both slowing job growth and risks of higher inflation, but he sees no need for aggressive rate cuts right now. Powell described current policy as “modestly restrictive” and capable of handling either threat, though uncertainty around tariffs and inflation remains.

The debate inside the Fed is intensifying:

• Dovish voices (Bowman, Miran): Argue the labor market is weakening faster than expected and that rates are too high, warning the Fed risks falling behind. Miran believes rates should be nearly 2 percentage points lower.

• Cautious voices (Goolsbee, Bostic): Stress that inflation remains above the 2% target and warn against cutting too aggressively while prices are still rising.

Markets expect two more rate cuts by year-end, which would bring the Fed’s key rate to its lowest since October 2022. Powell emphasized there is no immediate crisis, but acknowledged that both sides of the Fed’s dual mandate—employment and stable prices—are under pressure.

Key takeaway: The Fed is split between cutting faster to protect jobs or moving carefully to avoid reigniting inflation. Powell is signaling patience, but risks on both sides remain high. Read More.

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5 Places World War III Could Start Right Now

The risk of great-power war is higher in 2025 than a decade ago. Five hotspots—Taiwan Strait, NATO’s eastern front, Israel–Iran, Korean Peninsula, and India–China Himalayas—could ignite conflict. The common danger is miscalculation under intense pressure, with seconds to decide in crowded, high-tech battle spaces.

The Five Flashpoints:

1. Taiwan Strait: China could use blockades, missile “tests,” and cyber strikes against Taiwan. U.S. and allies would be forced to respond, raising chances of direct clashes.

2. NATO’s Eastern Front (Ukraine, Black Sea, Baltics): Russia’s actions near NATO borders risk accidental escalation; a single misfire or clash could trigger Article 5 and a wider war.

3. Israel–Iran Theater: Ongoing missile and drone exchanges risk spiraling into regional war involving Hezbollah, U.S. forces, and global energy chokepoints.

4. Korean Peninsula: North–South tensions remain volatile; even a small clash could escalate rapidly, especially with nuclear posturing.

5. India–China Himalayas: Border skirmishes at high altitudes could escalate into larger military conflict between two nuclear powers.

Why Risks Are Worse Now:

• Speed: Drones, missiles, and hypersonics compress decision-making to minutes.

• Transparency: Ubiquitous satellites and surveillance make every move visible and often misinterpreted.

• Gray-zone tactics: Cyber, militias, and proxy forces create ambiguity but real danger.

• Deterrence erosion: Countries increasingly think they can control escalation—history suggests otherwise.

Prevention Strategies:

• Credible hard power: Submarines, air defenses, and ready logistics to make attacks costly.

• Real crisis channels: Effective hotlines and rules for unmanned or accidental encounters.

• Clear red lines & off-ramps: Explicit triggers for retaliation and options for de-escalation.

• Economic resilience: Buffers in energy and supply chains to reduce political pressure for rash responses.

Conclusion:
World War III isn’t inevitable, but we’re closer than we admit. Avoiding it requires preparation, communication, and political firebreaks before a crisis begins. Read More.