Will today be Jerome Powell's last Jackson Hole speech? His remarks will be key for the US economy
Powell speech today: Federal Reserve Chair Jerome Powell is set to deliver his widely anticipated speech at the Jackson Hole symposium on Friday morning, a moment many investors are watching closely to see if he signals an interest rate cut as soon as next month, as per a report.
But beyond the immediate question of rate moves, Powell’s speech will address two much bigger issues shaping the future of the central bank and his legacy as chair, as per a Yahoo Finance report.
Divided Views Among Fed Officials on Rate Cuts
As the debate over the economy and possible rate cuts heats up, Powell faces a divided views among Fed officials, according to the report. Kansas City Fed President Jeffrey Schmid and Cleveland Fed President Beth Hammack expressed caution on the need for interest rate cuts, saying current inflation data doesn’t yet justify cutting rates, as per the Yahoo Finance report.
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Hammack explained that, “There’s a lot of data we’re going to get between now and September, and I walk into every meeting with an open mind about what the right thing to do is,” adding, “But with the data I have right now, and with the information I have, if the meeting was tomorrow, I would not see a case for reducing interest rates,” as quoted in the report.
Meanwhile, other Fed officials like Michelle Bowman and Chris Waller have been more vocal about the need for rate cuts, as per the report. As of early Friday, investors were assigning roughly a 69% chance of a 0.25% cut on September 17, according to Yahoo Finance.
Political Pressure Surrounding the Federal Reserve
Powell’s speech will also come amid political tensions, with US president Donald Trump recently urging Federal Reserve Governor Lisa Cook to resign over controversy involving two mortgage loans, as per the report. The Department of Justice reportedly sent Powell a letter urging Cook’s removal, according to the report. Trump, who has called Powell “Too Late” for not cutting rates sooner, has regularly criticized Fed policy and pushed for lower interest rates than the current 4.25%-4.50% benchmark, as reported by Yahoo Finance. Treasury Secretary Scott Bessent also recently suggested the Fed should consider a 0.50% cut in September, according to the Yahoo Finance report.ALSO READ: Kamala Harris’ 107 Days book tour: Dates, cities, what to expect and when to get tickets
Jerome Powell Stresses Importance of Fed Independence
Despite these pressures, Powell emphasized last month the importance of an independent Fed, saying, “I think that having an independent central bank has been an institutional arrangement that has served the public well,” adding, “And as long as it serves the public well, it should continue and be respected,” as quoted in the report.
Major Changes Expected in Fed’s Inflation Targeting Strategy
In addition to the rate outlook, Powell is expected to announce changes to the Fed’s policy framework, particularly signaling an end to average inflation targeting, as per the Yahoo Finance report. This policy, introduced before the pandemic when inflation was low, allowed the Fed to tolerate inflation running above 2% to make up for prior shortfalls below that level, according to the report. There is expectation that Fed would likely shift back to focusing on a straight 2% inflation target, as per the Yahoo Finance report.
During a speech in May, Powell said “The economic environment has changed significantly since 2020, and our review will reflect our assessment of those changes,” as quoted in the report.
FAQs
Are interest rates expected to be cut soon?
Investors expect a 69% chance of a 0.25% cut in September, but some Fed officials remain cautious, as per the Yahoo Finance report.
Why is Jerome Powell’s speech so important?
It may reveal the Fed’s plans on interest rates and outline major changes in policy that affect the economy for years.