Jerome Powell began the highly anticipated speech at Jackson Hole, Wyoming. Powell gave a not overly optimistic signal about a rate cut while emphasizing the high level of uncertainty making the job of monetary policymakers difficult.

Powell Signals Rate Cut

Highlights from Powell's speech at the Jackson Hole conference are as follows:

When I stood at the podium last year, the economy was at a breaking point. Our policy interest rate has fluctuated between 5.5% and 5.5% for over a year. This restrictive policy stance is appropriate to help reduce inflation and maintain a sustainable balance between aggregate supply and demand. The risk of rising inflation has diminished.

But this year, the economy is facing new challenges. Significant tariffs among our trading partners are changing the global trading system.

Although the labor market appears balanced, this balance is quite strange, stemming from significant declines in both labor supply and demand.

This unusual situation indicates increasing risks to the labor market.

Regarding inflation, the latest data shows that PCE inflation over the past 12 months rose to 2.6% in July. Core inflation increased to 2.9%.

Labor supply has weakened relative to demand.

The risk balance is shifting. Currently, policy is in the restrictive zone, and the baseline outlook is changing, and the risk balance may require us to adjust our monetary policy stance.

"The tariffs pose a risk of inflation rising again, and a recession remains a scenario the Fed needs to avoid. However, the baseline scenario is that we believe the impact of tariffs on inflation is only temporary."

Powell's speech appeared cautious and measured, suggesting the possibility of a rate cut but not making a specific commitment.

Kobeissi's letter assesses that the Fed will cut rates by 25 basis points in September and "blame" the labor market for this.

Powell's Comments on Trump

Although Powell did not specifically mention the White House's call for rate cuts, he emphasized the importance of the Fed's independence.

"FOMC members will make this decision entirely based on data and its impact on the economic outlook as well as the risk balance. We will never change this approach," Powell said.

Bitcoin is Rising

Prior to Powell's speech, Bitcoin's price dropped below $112,000, hitting a 1.5-month low. Below is the price movement of Bitcoin during Powell's speech:

The Fed Chair's speech at the annual gathering of central bankers comes amid increasing instability surrounding the economy and interest rate policy. Expectations for a rate cut in September are rising, with a 89.4% probability of a 25 basis point cut. The likelihood of keeping rates steady is priced at 10.6%.

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