A Zigzag Data Pattern in Jackson Hole Gives Powell Reason to Hedge

A few weeks ago, the narrative seemed clear. A disappointing jobs report signaled a sharp slowdown in hiring, strengthening the case for easing policy. Then came the biggest spike in U.S. wholesale prices in three years, reigniting fears of tariff-driven inflation one of the main reasons the Fed has hesitated to act this year.

‍

This mix of signals means Powell’s Jackson Hole speech will be under intense scrutiny. In July, he described the labor market as “solid” and policy as “well positioned.” Investors will be parsing his words for any sign of a shift, which could open the door to a cut at the Fed’s next meeting on September 16–17. Still, with more economic data due before then, Powell may choose a cautious tone to keep options open.

‍

“I expect him to point toward lower rates at the next meeting, but he’ll make it clear the decision depends on incoming data,” said Jonathan Pingle, chief U.S. economist at UBS Securities. “He’s not going to lock it in.”

‍

Bond traders have been leaning toward a September cut. Two-year Treasury yields often the most sensitive to Fed moves dropped sharply earlier this month as expectations grew for a quarter-point reduction. Those bets surged after the weak July jobs report and were only slightly scaled back after last week’s inflation surprise.

‍

Markets now want clarity: Will Powell validate this pricing or remind investors that fresh data could change the outlook? There’s also speculation about the broader strategy for rate cuts into 2025.

‍

“Part of the debate is whether to start early and move gradually, or wait longer and act more aggressively,” said Ed Al-Hussainy, a rates strategist at Columbia Threadneedle.

‍

While policy will dominate headlines, Powell’s Jackson Hole remarks may also carry a reflective note. This will be his last appearance at the symposium before his term as chair ends in May, and it comes after one of the most turbulent stretches in Fed history. Trump has repeatedly criticized Powell’s leadership and even hinted at removing him a move many see as a threat to the Fed’s independence.

‍

The speech will also touch on the Fed’s ongoing review of its policy framework, which aims to incorporate lessons from the pandemic era and the inflation surge that followed. This review could shape monetary strategy for years to come.

‍

Inside the Fed, unity on a patient approach to rates is cracking. The labor market slowdown has prompted some officials, including Governors Christopher Waller and Michelle Bowman, to dissent from July’s decision to hold rates steady, arguing instead for a cut.

‍

Trump has seized on these splits to intensify his push for deeper cuts up to four percentage points from the current 4.25%–4.5% range. Treasury Secretary Scott Bessent has also floated the idea of a 50-basis-point reduction in September, echoing last year’s move after weak jobs data.

‍

Still, not everyone agrees on going big. San Francisco Fed President Mary Daly supports two cuts this year but warned that a large move next month would signal unnecessary urgency.

‍

One area where Powell is likely to offer more detail is the framework review. The current version, adopted in 2020, allowed inflation to run above the 2% target for a period and moved away from automatically tightening policy in response to a hot job market. These changes were shaped by the sluggish post-2008 recovery but proved problematic during the pandemic inflation surge.

‍

Powell has hinted these features may be revised to better handle a range of economic scenarios. “The pandemic was a sharp reminder that labor markets can overheat and inflation can soar,” said Michael Pugliese, senior economist at Wells Fargo. “The Fed now needs a framework that balances those risks more symmetrically.”

‍

Investors should expect a carefully balanced speech from Powell acknowledging risks on both sides while keeping flexibility ahead of critical economic data and the September meeting. The tone may not be as bold as last year’s, but every word will matter for markets betting on the Fed’s next move.

‍