Fed Chair Jerome Powell delivered his highly anticipated address at the Jackson Hole symposium, offering markets fresh insight into the central bank’s policy stance heading into the September FOMC meeting. His remarks acknowledged a “curious balance” in the labor market, persistent though tariff-driven inflation pressures, and the Fed’s ongoing challenge of balancing its dual mandate. Powell struck a tone that leaned cautiously dovish, leaving the door open to rate cuts while stressing that decisions remain firmly anchored to incoming data and the evolving economic outlook
Key Highlights
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Door to September rate cut opened
Powell suggested the Fed may consider cutting rates next month, noting both labor demand and supply are slowing. While he stopped short of committing to a move, his tone leaned more dovish. -
Labor market risks rising
Job growth has weakened, with risks of a faster rise in unemployment. Powell stressed the balance of risks has shifted, putting employment on more fragile footing. -
Tariff-driven inflation likely temporary
Tariffs are pushing up prices, but Powell emphasized that these effects are likely short-lived one-time shifts, not a lasting inflation dynamic. Still, he flagged risks from potential wage–price spirals or rising expectations. -
Fed remains data-driven and independent
Powell reaffirmed that the Fed’s path is not preset, with all decisions based on incoming data. He also underscored the Fed’s independence amid external political pressures.
Later, Fed’s Hammack (2026 voter) struck a more hawkish/less dovish tone than markets took from Powell. She emphasized that inflation remains too high and continues to pressure households, requiring the Fed to keep policy mostly restrictive. While she noted the Fed is only modestly restrictive and close to neutral, she stressed that the focus must remain squarely on bringing inflation back toward target. Hammack said she is open-minded going into September, with more data to assess, but underscored that a significant weakening in unemployment would be needed to justify easier policy. For now, she views risks as tilted toward persistence in inflation and signaled caution against easing too quickly.
Although the Fed chair laid the pipe for a cut, US jobs data and US inflation data are to come. The market did start to price in more of a cut. With the futures now pricing in a 90% chance of a cut in September.
US stocks moved sharply higher. Prior to the jump, the NASDAQ index was threatening to make a break below and away from its 200-hour moving average earlier this week (at 21169) and indeed did trade below that moving average level this week. However, with today’s gains the price surged back above that key moving average level and also back above its 100-hour moving average at 21368. The buyers are back in job control.
Despite the gains today, the NASDAQ index still closed the lower for the week (-0.58%). The S&P and Dow industrial average did close higher with the Dow industrial average rising by 1.53%. The S&P had a modest gain of 0.27%. The small-cap Russell 2000 of the back of a 3.86% rise today close the week up 3.298%.
European equities closed the session higher across the board, extending gains into the week. The German DAX rose 0.29%, the French CAC gained 0.40%, and the UK FTSE 100 advanced 0.13%, finishing at a new record high. Southern Europe led the day, with Spain’s Ibex up 0.61% and Italy’s FTSE MIB climbing 0.69%, both settling at 17–18 year highs. For the week, momentum was also positive: the DAX added 0.02%, the CAC 0.58%, the FTSE 100 2.0%, the Ibex 0.78%, and the FTSE MIB 1.54%, underscoring broad strength in European markets
US yields move lower with the shorter end influence the most.
- 2 year yield 3.694%, -9.8 basis points
- 5 year yield 3.757%, -10.2 basis points
- 10 year yield 4.253%, -7.8 basis points
- 30 year yield 4.876% -4.7 basis points
The US dollar moved sharply to the downside along with the lower yields in the expectations of Fed cuts.
- EUR -1.0%
- GBP -0.98%
- JPY -0.83%
- CHF -0.92%
- CAD -0.60%
- AUD -1.07%
- NZD -0.86%
