Powell Prepares to "Fight" Market's Rate-Cut Hopes at Jackson Hole

The past week delivered conflicting economic signals that have kept investors guessing about the Federal Reserve’s next move. Consumer sentiment unexpectedly weakened—marking the first retreat since April—while inflation expectations ticked higher, triggering renewed speculation that the Fed might pivot toward loosening monetary policy. This uncertainty sent the dollar index lower for a second consecutive week, dipping below 98, even as U.S. Treasury yields climbed on inflation concerns, with the 10-year yield reaching its highest level in two weeks.

Powell’s Jackson Hole Speech Takes Center Stage

The real spotlight next week falls on Federal Reserve Chairman Powell’s address at the Jackson Hole Global Central Bank Annual Meeting on Friday at 22:00. Market participants expect Powell to “fight” against aggressive expectations for imminent rate cuts, potentially signaling a more patient stance on policy adjustments. His remarks could either calm dovish sentiment or confirm that the Fed sees a need for further tightening before shifting to a more accommodative posture.

Key Events Shaping Market Expectations

The week ahead serves as a crucial test of the Fed’s messaging. On Wednesday at 23:00, Federal Reserve Governor Waller will speak at the Wyoming Blockchain Seminar, offering early signals about policy thinking. Thursday brings a busy schedule: the Fed releases monetary policy meeting minutes at 2:00, followed by Atlanta Fed President Bostic’s speech on economic outlook at 3:00 (Bostic holds a 2027 FOMC voting seat). At 20:30 Thursday, the initial jobless claims data for the week ending August 16 will be released, providing fresh insights into labor market resilience.

Tariff Impact on Economic Health

Equally important is how Trump’s reciprocal tariffs will reshape economic growth. Next week’s European and American PMI data will offer the first significant window into tariff effects on business activity. HSBC analysts highlighted in recent commentary that “with reciprocal tariffs now in force, the input cost component of PMI surveys—particularly in the United States—should begin reflecting the price impact of elevated tariffs.” This could reveal whether rising input costs are already pressuring business sentiment and pricing decisions across both regions.