1. Powell’s signal on September rate cuts
Markets have all but priced in a quarter-point cut at the Fed’s September 16-17 meeting, with the CME FedWatch tool showing an 81% probability. Traders also expect another cut by year-end. That makes Powell’s words especially market-moving. If he hints that the Fed wants to wait for more data, investors may have to swiftly rethink those bets.2. Inflation goals versus a weakening jobs market
Inflation has eased from its peak but still remains above the Fed’s 2% target—headline Consumer Price Index (CPI) was 2.7% in July, and core inflation stood at 3.1%.
At the same time, jobs growth has slowed sharply, with July nonfarm payroll gains the weakest in nearly five years and earlier months revised sharply lower.
Powell has often said the unemployment rate is the best gauge of labour health. If he leans on that weakness, it could be read as a sign the Fed is ready to ease soon. If he focusses more on sticky inflation, it may mean cuts aren’t a done deal yet.
This year’s theme — “Labor Markets in Transition” — allows Powell to frame policy beyond near-term rate moves and touch on the longer-term playbook, including the Fed’s strategy of average inflation targeting. There’s ongoing debate over whether the central bank should stick to its 2% goal or tweak it. A CNBC survey shows 52% of respondents want the target retained, while 44% favour a broader range of around 1.4% to 2.7%.Investors will be parsing Powell’s words for signs that the Fed may redefine “price stability” under its dual mandate.
3. Cracks in Fed consensus
The minutes of the July meeting showed rare public dissent. Two governors — Michelle Bowman and Christopher Waller, both appointed by Donald Trump — voted for a cut, while most policymakers wanted to keep rates steady at 4.25–4.50%, citing tariff-related inflation risks. Reuters noted this was the first time since 1993 that two Fed governors dissented on the same move, a sign of how divided the central bank has become just as Powell heads into Jackson Hole.
4. Politics looming over the Fed
President Donald Trump has repeatedly criticised Powell for not cutting rates faster. But Powell and his colleagues have so far resisted, citing the risk of inflation from tariffs. That tension will hang over his Jackson Hole speech. Investors will be listening for how strongly he frames decisions as data-driven, which would serve as a subtle defence of the Fed’s autonomy.
A CNBC survey shows how divided expectations are for the next Fed chair after Powell’s term ends in May 2026: 41% of respondents believe the new chair will act independently of the president, while 37% think policy will be shaped in coordination with the White House. Nearly two-thirds also expect tariffs to drive “substantial” inflation in the months ahead, making Powell’s task even more complicated.
5. Clues for bonds, dollars, and stock
Powell’s Jackson Hole speeches often jolt markets, especially bonds. Reuters calculations show that after each of his past seven speeches, 10-year Treasury yields rose by an average of 21 basis points, the dollar gained 1.4%, and the S&P 500 fell nearly 2%. In 2022, his stark warning of “pain” for households and businesses sparked a 12% stock slump in just a month.
The timing also matters. The Fed meets in mid-September, but key reports — including the July PCE inflation print on August 29 and the next jobs report in early September — will land before then, influencing how people read Powell’s message.
