Wall Street on Edge: Powell’s Jackson Hole Speech Looms Amid Rate Cut Uncertainty

All eyes are on Federal Reserve Chairman Jerome Powell as he prepares to deliver his highly anticipated speech this Friday at the annual Jackson Hole central bank conference in Wyoming. Market participants are keenly awaiting any signals regarding the future trajectory of U.S. monetary policy, particularly the widely expected resumption of interest rate cuts.

Wall Street has largely priced in a September rate cut, following months of the Fed holding steady as economic factors like President Donald Trump’s tariffs influenced the landscape. This expectation is fueled by recent White House pressure on the Fed to ease policy and the appointment of a more dovish governor to the board.

However, analysts and economists remain divided on whether Powell will provide explicit hints for a September cut. Some experts, like Michael Pearce of Oxford Economics, suggest that persistent inflation, exacerbated by tariffs, could keep the Fed on hold until December. The debate over deteriorating jobs data, whether signaling weak demand or supply, further complicates the outlook, as supply-side issues could worsen inflation if rates are cut.

Market veteran Ed Yardeni maintains a “none-and-done” forecast for the year, anticipating the Fed will delay cuts due to elevated inflation and the U.S. economy’s resilience. Similarly, Bank of America has expressed skepticism about immediate rate cuts, noting Powell’s previous comfort with low job gains as long as unemployment remains stable.

The stakes are high: Wall Street has so thoroughly factored in a September cut that a lack of clear guidance from Powell could be perceived as a de facto tightening of monetary policy, leading to significant market disappointment. While some economists, including those from JPMorgan and Citi Research, expect Powell to acknowledge the possibility of a cut, they doubt he will offer a firm commitment, preferring to emphasize data dependency. The upcoming speech is poised to be a pivotal moment for the markets, as investors seek clarity on the Fed’s next move.

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