Federal Reserve Chair Jerome Powell will deliver a keynote at the Kansas City Fed’s annual Jackson Hole policy conference on Friday, a moment that comes at a pivotal point as markets await the central bank’s next move on interest rates and as Powell’s tenure as chair nears its end.
Powell’s speech at Jackson Hole is widely viewed as potentially his last in the top role, with a term that runs through May 2026 and talk of whether President Trump would reappoint him. Trump has signaled he may not reappoint Powell, though Powell would still remain on the Fed’s board as a governor through 2028 unless he chooses to depart sooner. The address arrives amid broader uncertainty about the economy’s trajectory, even as the labor market remains near full employment. The July jobs report came in weaker than expected, and May and June revisions show a slower pace of job creation, raising questions about how durable the labor market will be as tariffs push prices higher.
Powell could use the Jackson Hole platform to lay out how he interprets the latest data and to signal whether rate cuts might resume in September, a pattern he helped establish last year when he framed the data-dependent path for policy. The discussion takes place against a backdrop of a recent history of gradual easing and a period of restraint by policymakers this year.
In August 2024, Powell indicated that rate cuts would begin at the next meeting in September, framing the move as a policy adjustment in response to evolving conditions. The Fed did cut rates by 50 basis points in September 2024 and followed with 25-basis-point reductions in November and December. Since then, policymakers have kept the benchmark federal funds rate in a 4.25% to 4.5% range at every meeting in 2025, reflecting ongoing uncertainty about how tariffs will affect inflation and how resilient the labor market will remain.
Markets are pricing in a September rate cut after a disappointing jobs report, though the most recent FOMC meeting featured a rare dual dissent from Governors Michelle Bowman and Christopher Waller. They argued for a 25-basis-point cut and said tariff-driven inflation would likely be a one-time shift, while still supporting the labor market. The vote, however, left policy unchanged on a 9-2 vote, underscoring the committee’s cautious stance amid mixed signals from inflation and employment.
Inflation has cooled from 2022’s peak but has ticked higher in recent months as tariffs take effect. The personal consumption expenditures (PCE) price index, the Fed’s preferred gauge, rose from a 2025 low of 2.1% in April to 2.3% in May and 2.6% in June, leaving inflation above the Fed’s 2% target. On the labor front, July added just 73,000 jobs, far below the 110,000 anticipated by economists, and May and June payrolls were revised down by a combined 258,000. The unemployment rate in July edged up to 4.3%. Taken together, these figures paint a labor market that is cooling, even as the broader economy remains resilient.
Upcoming data releases will continue to shape the policy debate: the July personal consumption expenditures report is due on August 29, the CPI is due September 11, and the August employment report is set for release on September 5. Traders and analysts will be parsing Powell’s Jackson Hole remarks for clues about how much weight the Fed will place on incoming data versus a cautious approach to policy normalization, particularly in the face of tariff-driven inflation risks.
In complexity and uncertainty, the central bank’s leadership faces a delicate balancing act. Powell’s leadership through this period—together with the incoming data—will help markets decide whether the economy can sustain a path toward gradual rate cuts in the near term. The underlying signals remain mixed: growth is cooling, inflation is stubbornly above target in the near term due to tariffs, and the labor market, while still solid, is showing signs of slowing momentum.
What to watch next: Powell’s Jackson Hole remarks for guidance on the timing and scope of any potential rate cuts, the trajectory of inflation as tariff effects continue to filter through prices, and the evolving labor market data in the run-up to August and September releases. If data remain mixed but supportive, a September move could be on the table; if inflation remains sticky and payrolls slow more than expected, policy guidance may lean toward patience and further data dependence.
A hopeful perspective: even amid uncertainty, the U.S. economy has shown resilience, with a strong labor market and inflation gradually moderating away from the pandemic-era highs. A data-driven approach from the Fed—emphasizing careful calibration of policy in response to incoming numbers—offers a path to sustaining growth while keeping inflation on a steady, cooling trend. Powell’s stewardship during this period could help anchor expectations and foster a stable environment for markets and households as the economy navigates tariff-driven pressures and evolving global conditions.
Summary: Powell’s Jackson Hole appearance comes at a crossroads for U.S. monetary policy, with the Fed weighing potential rate cuts against a backdrop of tariff-driven inflation and a cooling but still sturdy labor market. Markets will be listening closely for signals on the September move and the broader policy path as data continue to inform the central bank’s cautious, data-driven approach.