Friday, August 22, 2025

A half hour after the opening bell for the final trading day of the week, Fed Chair Jerome Powell will take the stage at the Jackson Hole Economic Symposium this morning, in one of his most anticipated Jackson Hole speeches in years. Investors will be listening closely to hear if the deliberate and methodical Powell will be leaning toward a 25-basis-point (bps) interest rate cut.

The Fed has kept rates steady year-to-date at 4.25-4.50%. In historical terms, we’re neither high nor low — Powell’s main objective has been the same as the Fed’s dual mandate has always dictated: full employment and controlled inflation. Powell has set a 2% inflation rate as his objective during his tenure (which almost certainly ends by the conclusion of his current term next May, at the latest).

In recent months, we’ve seen a slow emergence of Fed objectives moving in opposite directions: the labor market has undeniably cooled off while tariff initiatives have begun to send inflation somewhat higher. Thus, whether the Fed — and Powell specifically — would be more inclined to bring about a 25 bps rate cut at its September meeting (the 16th and 17th) or not is what the interpretation of today’s speech pivots on.

It’s not that Powell’s initiatives have always been spot-on, either. At the Jackson Hole summit four years ago, he rather infamously declared inflation “transitory” (read: temporary) even as the stickiness of supply chain constriction in the wake of the Covid pandemic was already becoming evident. 

At the time, Powell was concerned with the economic well-being of those on the lower end of the labor market; he was interested in having them see some groundswell in income, as others up the chain of the economy already had. But it turned out to be a move that helped balloon the inflation rate up to +9.1% in June 2022 — 40-year highs.

Much of the Fed’s decision on interest rate policy, which saw two dissents at the July meeting (for a 25 bps cut, as the final decision was to keep rates steady) for the first time in decades, will rest on economic data. Here, the timing could certainly have been better regarding today’s speech: the Fed’s preferred economic report is Personal Consumption Expenditures (PCE), which doesn’t report for July until a week from today.

In the June report on PCE, headline +2.6% was up 40 basis points in two months. While the level is not troubling in and of itself, it is pulling away from that +2% target; it got closest back in September of last year: +2.1%. Core PCE, stripping out volatile food and energy prices, came in at +2.8% for the second-straight month. 

The Fed will have the benefit of next week’s PCE report — along with another Consumer Price Index (CPI) and Inflation Rate (+2.7% the past two months) and BLS jobs numbers — before making its decision on a rate cut in September. Thus, we expect Powell to be firmly “data dependent” in his speech today, neither confirming nor denying whether a 25 bps cut is coming. Analysts will be parsing his language closely, however, to look for nuance in his outlook.

Pre-market futures are up this morning after a week-long swoon. The S&P 500 looks to break a five-session losing streak. The market has taken some of the air out of tech stock valuations and reckoned with retail earnings reports and their outlooks in re tariff considerations. The Dow is +135 points at this hour, the S&P 500 is +13, the Nasdaq +27 points and the small-cap Russell 2000 +10.

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