By Isabel Wang
The Fed chair’s annual speech could trigger a significant repricing in bond yields and risk assets in the U.S. financial market
All eyes will be on Federal Reserve Chair Jerome Powell when he speaks in Jackson Hole, Wyo., on Friday.
Friday brings what’s become an annual rite of summer for U.S. financial markets, in the form of Federal Reserve Chair Jerome Powell’s address to monetary-policy mavens in Jackson Hole, Wyo.
Investors have their eyes fixed on the annual economic symposium hosted by the Kansas City Fed, as the central bank charts the future direction of its monetary policy in what could be a defining moment for the market’s summer story.
Powell speaks at 10 a.m. Eastern time Friday. This year, investors are hoping for confirmation that the Federal Reserve will resume cutting interest rates in September – a move largely priced into markets. Yet analysts warn that Powell could fail to do so, leaving the stock rally hanging by a thread or even sending markets into turmoil. The potential hang-up is that a number of policymakers appear worried that inflation from President Donald Trump’s tariffs is just around the corner.
“If Powell uses his Jackson Hole speech to draw a line in the sand – refusing to precommit to cuts or hinting that the market’s pricing has run ahead of reality – it could trigger a significant repricing in bond yields BX:TMUBMUSD02Y BX:TMUBMUSD10Y and risk assets,” said Daniela Sabin Hathorn, senior market analyst at Capital.com.
“Investors should tread carefully because what’s expected to be a calm, consensus-driven event could instead become the Fed’s rebuttal to market exuberance in months,” she told MarketWatch in emailed commentary.
See: Will Powell use Jackson Hole speech to push back on hopes for September rate cut?
Stocks have wobbled in the run-up to the speech, with a violent rotation out of high-flying megacap tech names sending the Nasdaq Composite COMP down 2.4% so far this week. The S&P 500 SPX has pulled back 1.2%, with both indexes remaining not far below record closes set last week. The less tech-centric Dow Jones Industrial Average DJIA is off just 0.4% this week.
Fed-funds futures traders on Thursday were pricing in a 73.5% probability of a quarter-point interest-rate cut at the central bank’s Sept. 16-17 meeting, with at least another 25-basis-point reduction expected by year-end, according to the CME FedWatch Tool.
Those expectations have helped fuel the stock-market rally over the past month, propelling the three major indexes to or near record territory after economic data showed consumer prices have only risen slightly due to tariffs and the labor market may be losing steam at a quicker pace than previously thought – factors that appear to support the case for a Fed rate cut.
But the probability of a September cut priced into the market has faded from around 90% a week ago, reflecting that the economic picture is far from one-sided. The cost of wholesale goods and services – where rising inflation tends to show up first – posted the biggest increase in July in three years, possibly pointing to a sizable acceleration in price hikes tied to U.S. tariffs. The unemployment rate was still hovering at a historically low level – offering little justification for a Fed easing anytime soon.
Policymakers last month “generally expected inflation to increase in the near term,” minutes of the Fed’s July meeting showed on Wednesday. While they disagreed on whether that would be a short-term increase in price pressure, they thought higher costs will eventually hit U.S. businesses and companies would have to pass through the costs to consumers.
See: Fed officials see inflation just around the corner – and think consumers will bear the burden, minutes show
That’s why Callie Cox, chief market strategist at Ritholtz Wealth Management, said Powell could throw cold water on investors’ near-certainty of a September rate cut.
“I would expect him to weigh in on today’s market environment – I can’t imagine with inflation and jobs data at where they were [in July] that he will be able to confirm how sure markets are about getting a rate cut in September,” Cox told MarketWatch in a phone interview.
But stock-market investors are not only expecting a September cut, they’re also yearning for reassurance that more Fed easing lies ahead, said Shannon Saccocia, chief investment officer of wealth at Neuberger Berman.
“Last year at this time, this was the speech that Powell really set the stage for Fed action, so there’s a lot riding on his comments on Friday, particularly given what was deemed to be a disappointingly hawkish tone out of the last Fed meeting from him in the press conference,” Saccocia told MarketWatch via phone on Wednesday.
That’s why Powell’s words could provide crucial clarity on whether these market expectations are well founded. But for a stock market that has enjoyed a seemingly relentless rally marked by unusually low volatility for most of the summer, choppy waters may finally lie ahead – and there’s little room for disappointment if Powell hints at policymakers requiring more data before resuming the easing cycle that has been put on hold ever since December, according to market analysts.
See: Stocks often rise the week of the Fed’s big Jackson Hole gathering. Don’t count on it this year.
To be sure, investors have reason to be cautious. Back in 2022, Powell’s keynote speech at Jackson Hole stopped a torrid bear-market rally when he insisted that the central bank remained committed to bringing down inflation by raising interest rates forcefully, even if this approach resulted in some pain for American consumers and businesses.
“Jackson Hole has become increasingly important over the last couple of year – but this year, the potential for rate cuts coming in about a month, along with the political pressure that the Fed and the chair in particular are under, make Powell’s comments more market-moving than we expected,” Saccocia said.
Powell’s speech comes amid intensifying pressure on the Fed from President Trump and his allies.
Trump has repeatedly slammed and insulted the Fed chair for not quickly resuming rate cuts, and called for his resignation while stopping short of attempting to fire Powell. On Wednesday, the president called on Lisa Cook, a Fed governor, to resign after Bill Pulte, the head of the Federal Housing Finance Agency, alleged on social media that she had submitted what he described as fraudulent information on a pair of mortgage applications. Cook said she had no intention to resign and was gathering information to respond to questions.
U.S. stocks DJIA SPX COMP finished lower on Thursday after economic data showed first-time jobless claims rose more than expected last week, adding to concerns the labor market is losing steam.
-Isabel Wang
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
08-21-25 1618ET
Copyright (c) 2025 Dow Jones & Company, Inc.