Jackson Hole Symposium Shows Difficult Road for the Fed
This year's annual meeting at Jackson Hole was tense. In his keynote address, Fed Chairman Jerome Powell left open the possibility of a rate cut at the September 16-17 meeting. Markets immediately raised the probability of a rate cut to nearly 90%, as bond yields fell and the dollar weakened—a combination that typically supports risk assets and gold.
Behind the scenes, internal debate was becoming more pronounced. The July minutes showed that two governors—Christopher Waller and Michelle Bowman—were already in favor of cutting rates, though the majority preferred to hold. This reflected a dilemma: inflation remained above the 2% target while the labor market began to weaken.
Powell emphasized that the Fed must navigate “cross risks”: lingering price pressures and signs of weakening employment. He also said the impact of new tariffs on inflation was likely temporary but still warranted close attention. Similarly, Chicago Fed President Austan Goolsbee previously acknowledged that businesses were nervous about tariffs—a signal that non-monetary factors were clouding policy direction.
Political pressure further complicated the situation. President Donald Trump threatened to fire Fed Chair Lisa Cook if she didn't resign over allegations of "mortgage fraud," which Cook denied. Tensions even boiled over at the event venue: Trump supporter James Fishback was briefly evicted after confronting Cook in the hotel lobby. Security was noticeably tighter than in previous years.
Looking ahead, uncertainty doesn't end in September. Disagreements within the Fed could persist, while Powell's term as Chair expires on May 15, 2026, providing political space to reshape the central bank's leadership. For now, Powell insists any move remains data-dependent while balancing inflation and employment risks.
Quick headline: Powell "opens the door" to a September rate cut; market odds ~80–90%.
July Dissent: Waller & Bowman wants a faster rate cut.
Rates risk driving near-term inflation; job market weakens.
Political pressure mounts: Trump's threat to Lisa Cook; incident at
Chair Powell's term ends in May 2026; The Fed's direction could become increasingly political. (ayu)
Source: Newsmaker.id
