The world’s most powerful central bankers will gather for their annual jamboree at Jackson Hole, Wyoming, this week where the attention of financial markets and the US president will be squarely on one man: Jerome Powell.
The embattled chairman of the US Federal Reserve has been the subject of a torrent of attacks from President Trump for not cutting interest rates.
A hefty list of candidates to replace Powell next year has been circulated to turn him effectively into a lame duck. White House officials have piled on further pressure in the past week by raising the possibility of an outsized half a percentage point interest rate cut next month.
On Friday in a speech to delegates in Wyoming, Powell will have the chance to respond. Analysts at Bank of America have dubbed his address a “blockbuster event” for traders.
“Powell’s view matters far more than anyone else’s,” Aditya Bhave, senior US economist at Bank of America, said. When the Fed yanked up interest rates by three quarters of a percentage point in June 2022 and then carried out a larger half a percentage point cut last September, it was “Powell [who] brought both markets and the majority of the Fed committee around to his preferred policy stance. Doubt his force of will at your own peril,” Bhave said.
Powell has remained steadfast in the face of Trump’s accusations that he is a “moron” who has been “too late” to cut borrowing costs this year. The Fed, which makes decisions with 12 voting policymakers, has kept its benchmark interest rate at 4.25 to 2.5 per cent all year but investors think there is more than a 90 per cent probability the central bank will loosen policy at its September 17 meeting by 0.25 percentage points.
However, recent evidence of stable inflation and a stagnant jobs market has led Scott Bessent, US Treasury secretary, to speak of the need for “a series of rate cuts … starting with a 50 basis-point rate cut in September”. He speculated that borrowing costs would need to fall by a total of 1.75 percentage points in the coming months.
While political pressure on him is mounting, few expect the resolute Powell to use his speech to communicate a significant shift in his tone about the potential for tariffs to raise inflation, or the jobs market to indicate a recession. “Powell is likely to not commit to any action,” Anshul Pradhan at Barclays said. “He is likely to reiterate that labour market conditions are best gauged by the unemployment rate but will likely give a nod to increased downside risks from the low pace of job gains.”