Will the Fed chair hint at cuts or hold steady?
Federal Reserve chair Jerome Powell will deliver his final keynote at the annual Jackson Hole Economic Symposium on Friday, closing eight years at the helm of the US central bank. The conference, held against the backdrop of the Grand Teton Mountains in Wyoming, has been the stage for some of Powell’s most pivotal announcements.
In 2022, Powell pledged to fight inflation whatever the cost, referencing former Fed chair Paul Volcker, Reuters reported. Last year, he shifted focus, saying “the time has come for policy to adjust.” Now, Powell is expected to address both inflation, which remains above the Fed’s 2% target, and a labor market showing signs of slowing.
A divided Fed
Federal Reserve officials are split on the path forward. Some policymakers, including governor Christopher Waller, have urged immediate rate cuts to protect employment. Others cite rising prices, partly driven by tariffs, as reason for caution.
“The Powell I know wants to be data dependent and not make a decision before he has to,” former Fed vice chair Richard Clarida told Reuters. He added that communication will be critical: “If they do cut in September there will be a lively communication discussion. What are we communicating? Is this one and wait? The first of five or six?”
Treasury secretary Scott Bessent argued that policymakers should act more proactively, referencing Alan Greenspan’s forward-looking strategy in the 1990s.
Market expectations
Wall Street has broadly priced in a September rate cut, though analysts caution Powell may not signal it at Jackson Hole. Yardeni Research predicted he would be “more of an owl—waiting and watching—than either a hawk or a dove,” Fortune reported.
Michael Pearce, deputy chief US economist at Oxford Economics, wrote Friday that tariffs are “feeding through unevenly” and may keep inflation elevated. He suggested the Fed could wait until December to cut rates, unless August jobs data come in weaker than expected.
JPMorgan analysts noted that recent labor data should tilt the Fed toward cutting rates, but they said Powell may not commit at Jackson Hole: “We don’t think Powell can firmly guide toward easing at the next meeting.”
Messaging challenge
Bank of America said Powell could temper expectations by stating that the “policy stance remains appropriate given the data at hand,” while leaving open the possibility of future cuts if conditions weaken.
Citi Research chief US economist Andrew Hollenhorst said Powell may acknowledge that risks to inflation and employment are coming into balance, which could justify moving toward a more neutral stance without confirming a September cut.
Richmond Fed president Thomas Barkin said last week that “the fog is lifting” as policymakers weigh inflation risks against slowing growth.
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