Tension builds between Wall Street, the White House, and the Fed
Federal Reserve chair Jerome Powell will deliver his closely watched address Friday at the Jackson Hole economic symposium in Wyoming, speaking under scrutiny as markets await signals about potential interest rate cuts and president Donald Trump continues his public campaign against the central bank.
Three possible scenarios
Powell’s speech, titled Economic Outlook and Framework Review, could unfold in one of three ways, according to analysts. The Fed chair may signal that rate cuts are coming as early as September, with financial markets pricing in an 83% chance of a reduction from the current 4.25% to 4.5% range, Investopedia reported.
Alternatively, Powell could temper expectations by emphasizing ongoing inflation concerns. Trump’s tariffs have begun showing up in wholesale prices, raising fears about a resurgence of inflation that remains above the Fed’s 2% target.
The third scenario involves Powell remaining noncommittal, waiting for additional economic data before the September Federal Open Market Committee meeting.
“We are in this uncomfortable equilibrium, where we don’t know where things go next,” Gennadiy Goldberg, chief rates strategist at TD Securities, told the Financial Times. “The market wants a bit of confirmation from Powell on Friday as to whether he is open to cutting rates.”
Trump’s criticism intensifies
Powell’s address comes amid escalating attacks from Trump, who has called the Fed chair a “stubborn mule” and “numbskull” for refusing to slash borrowing costs. The president wants rates cut to just 1%, claiming this would save the government hundreds of billions in debt payments.
Trump’s criticism extends beyond Powell to other Fed officials. This week, the president demanded the resignation of Fed governor Lisa Cook after allegations about her mortgage applications, though Cook has refused to step down.
“I have no intention of being bullied to step down from my position because of some questions raised in a tweet,” Cook said Wednesday evening.
Internal Fed tensions
Powell also faces growing dissent within the Fed itself. Christopher Waller and Michelle Bowman, two Fed governors, voted for rate cuts at July’s meeting. With Trump’s nominee Stephen Miran potentially joining the board, Powell could face three dissenters among the seven-member board—a level of opposition not seen since 1988.
Miran, who has endorsed Trump’s calls for rate cuts and proposed giving presidents power to dismiss Fed chairs at will, represents what analysts call an “agent provocateur” within the traditionally staid central bank.
“Miran is not somebody who’s going to be enveloped in and overwhelmed by the traditions inside the Fed,” said Steven Blitz, chief US economist at TS Lombard.
Economic crosscurrents
Powell must navigate conflicting economic signals. While unemployment remains relatively low at 4.2%, a sharp slowdown in hiring has raised concerns about labor market health. Meanwhile, Trump’s tariffs have created what one economist called “a stagflationary impulse” that complicates monetary policy decisions.
The Fed chair’s Jackson Hole speech traditionally serves as a platform for signaling major policy changes. In 2024, Powell used the summit to confirm the Fed’s intention to begin cutting rates after holding them high to combat post-pandemic inflation.
This year’s address carries even higher stakes as Powell attempts to maintain the Fed’s independence while addressing both market expectations and presidential pressure.
What are your thoughts on how Powell’s address at the Jackson Hole symposium will turn out? Share your insights in the comments below.
