Allianz: The Fed Is Entering Its Most Delicate Balancing Phase

Allianz Investment Management says the Federal Reserve is now operating in a narrow corridor, trying to balance two mandates that are pulling in opposite directions: cooling inflation while keeping employment stable. Charlie Ripley, Vice President at Allianz, notes that Powell’s latest rate cut may be his final move before policy leadership shifts — even though rates have not yet returned to neutral territory.

While meaningful progress has been made against inflation, Ripley highlights that the next Fed Chair will inherit the same challenge, especially as the incoming voting rotation leans more hawkish. Market expectations remain firm that policy may stay restrictive for longer, forcing the Fed to walk a tightrope between growth support and inflation control.

In Ripley’s view, the core challenge persists: policymakers can’t ease aggressively without risking another inflation wave, yet tightening further risks weakening labor markets — a balance the Fed must navigate carefully going into 2026.