What Will Fed Chairman Jerome Powell Say on Friday? Here Are the Predictions and Possible Effects on the Market

Fed Chair Jerome Powell is expected to hold his own against making a clear commitment to cut interest rates in September during his speech at the Jackson Hole meeting on Friday.

While markets are strongly pricing in a rate cut, Powell may avoid giving definitive signals, highlighting the uncertainty surrounding the process. Research firm LHMeyer suggested Powell could temper expectations to prevent markets from fully locking in on the cut.

Powell's speech will come under even greater pressure than usual this year. US President Donald Trump has been criticizing the Fed chair for months, calling him a “stubborn mule” and “unintelligent,” and harshly criticizing his resistance to interest rate cuts.

Trump is poised to challenge the Fed's internal balance of power by nominating economist Stephen Miran, a figure aligned with his political affiliation, to fill the vacant seat at the Fed. Miran, who supports Trump's calls for interest rate cuts, also advocates for reforms within the Fed that would empower chairmen to dismiss figures like Powell.

TS Lombard Chief Economist Steven Blitz commented, “Miran is not one to be swayed by tradition. He will be Trump's provocateur at the FOMC, and he will not hide it.”

Powell's job isn't just made more difficult by Trump's pressure and Miran's potential influence. At the Fed's last meeting, Christopher Waller and Michelle Bowman, considered among his successor candidates, voted against the majority to cut interest rates.

On the data front, the picture is mixed. A weak July employment report signaled a slowdown in the labor market, while a rise in the producer price index fueled concerns that Trump's tariffs would push up consumer prices. “The tariffs have created a stagflationary effect and seriously complicated the Fed's job,” said Torsten Sløk, chief economist at Apollo Global Management.

Barclays Chief Economist Marc Giannoni, however, noted that Powell's approach to assessing the unemployment rate will be decisive. Recalling Powell's warnings after the July meeting, Giannoni said, “If Powell reiterates that the unemployment rate could remain low due to supply-side factors like immigration, despite the weakening employment, the probability of a rate cut could be lowered to 50%.”

Market expectations for a September interest rate cut have recently declined. Following producer price index data and cautious statements from Fed members, expectations have fallen to 85%.