The annual Jackson Hole Assembly with the Federal Reserve's September meeting with the final major act of Geom Powell – and when the chair opposed the commitment to cut the rate, the market is convinced that the ground work has been kept.
Powell insisted on a characteristic vigilant note, emphasizing that the Fed still had jobs and inflation figures to digest before the middle of September. Still the message was clear: the door is easily open, and the expectations for the cut are firmly playing.
Nigel Green, Chief Executive Officer of Global Financial Advisory Group Devere, said Powell “did the best job to the central bankers – they kept the door open,” saying: “Fed is already behind the curve, and the balance of risk is becoming easier as soon as possible.”
Fed has not reduced interest rates since December, but economic signs are shining red. Development is softening, showing early signs of labor market stress, and increasing costs in tariff supply chains planted by President Donald Trump.
“The irony is that Trump's tariff push, designed for project strength, is currently one of the largest inflation forces in the economy,” Green said.
While a rate cut will not undo the tariff-powered price pressures, this credit can provide relief by flowing and maintaining confidence.
The decision time now rests on the early economic release of September. Monthly job reports will test whether the hiring speed may be cured, while the inflation figures next week will confirm whether the unexpectedly hot bulk prices of July were an outsider.
The markets are already irritable: the dollar has been whipped, the treasury yield is slipping, and the Risk-sensitive currencies ranging from the Australian dollars to the Korean victory are reacting to every sign of fed recallabration.
“If the data of jobs are weak, or if showing signs of rolling inflation, Powell will have all the covers that it needs to move,” Green said. “Waiting for a long time to further tighten financial situations – markets do not have patience forever.”
The Vyoming Retreat has often served as a platform for decisive changes in Fed Communications. In 2010, Ben Bernanke formed the basis for quantitative ease. In 2022, Powell introduced the mantra “Higher for a long time”.
This year, his tone was more preserved, but subtuce infallible: Fed is preparing the market for change.
If the rates decline, potential beneficiaries already see. Capital-intensive technology and AI firms will face low financing costs. Real estate investment trusts and utilities, which thrive when falling into bond yields, can see an increase in demand. Small cap companies are highly dependent on borrowings, will also benefit.
“These are companies that will run the next cycle of development,” Green argued. “Investors who are in a hurry position will catch upside down before it becomes a consensus.”
For homes, the picture is mixed. High-or-I Americans continue to spend independently, but medium and low-or-come groups are tightening their belts. The earning season has highlighted this deviation, explaining why policy makers are afraid that the weakness below may pull down the wider economy.
“Fed cannot target tariffs, but it can target faith,” Green said. “A cut in September will assure homes and businesses that the central bank is not sleeping on the wheel.”
Powell has indicated that he is waiting for data, but global peers such as European Central Bank and Bank of England are already adjusting their policy stance. The risk for the fed is that delayed, it falls behind the curve.
“Now there is a window for action,” Green concluded. “We expect a cut in September. If Powell wait for the right circumstances, the fed will end the chase of events rather than shaping them.”
Paul Jones
Harvard alumni and former New York Times journalist. Editor of Vocational Affairs for more than 15 years, UK largest business magazine. I am the head of the automotive division of Capital Business Media, working for customers like Red Bull Racing, Honda, Eston Martin and Infinity.