Powell at Jackson Hole – What It Means for Rates
Fed Chair Jerome Powell acknowledged that job growth has slowed much more than previously thought, with recent revisions confirming a softer labor market. He noted that downside risks to employment are building, and if they show up, they could hit quickly through layoffs and rising unemployment.
On inflation and tariffs, Powell maintained that the impact should be relatively short-lived—a one-time bump in prices rather than a sustained trend.
Growth has cooled notably, now running at about 1.2% for the first half of the year, roughly half its prior pace. Powell closed by saying the Fed’s current policy stance is restrictive, and the changing risk picture could warrant an adjustment.
The market heard that loud and clear—odds of a 25bp rate cut at the September 17 meeting are now hovering around 90%. Still, a few data points could shift the tone: PCE later this month, CPI in early September, and the September 5 Jobs Report will likely be the biggest driver. Weak data would cement a cut; strong data could make the Fed hesitate.
One wild card: QCEW Benchmark Revisions coming September 9 could change the narrative if they show stronger late-2024 job growth than initially reported.
Separately, there’s political noise: Fed Governor Lisa Cook is under scrutiny for alleged mortgage fraud, and President Trump has indicated he would move to replace her if she doesn’t resign. If that happens, a new Trump appointee would likely lean more dovish, adding another vote for rate cuts.