Powell's last speech: Federal Reserve Chair Jerome Powell is expected to give (what will probably be) his last address today in Jackson Hole, Wyoming, laying out how he believes the central bank should help manage the economy in an increasingly weird time—and, possibly, tackling President Donald Trump's increasing attacks on the Fed's independence, and the pressure placed on them to lower the cost of borrowing.
With a labor market deteriorating (and recent jobs numbers revisions signaling this has been going on for a few months longer than some observers realized), it's possible Powell will portend rate cuts, which the Trump administration has been requesting. But the Fed's job isn't to curry favor with the administration through its policies (something Powell rightly chafes at). It's to manage two massive risks and the interplay between them: inflation, rising with tariffs, and slowing job growth. "If the Fed puts more weight on the threat of resurgent price pressures and holds interest rates steady when it meets next month, that could raise the odds of an economic downturn," notes The New York Times. "If the Fed instead moves to shore up the labor market by restarting interest rate cuts that were put on hold in January, inflation may be more likely to get stuck above the central bank's 2 percent target."
Back in 2020, the Fed made a few significant changes to its framework: It "said it would allow inflation to run modestly above its 2% target for periods to make up for times when it had fallen short" and that it "would focus only on the unemployment rate being too high, rather than also worrying about the rate being too low, removing some urgency to pre-emptively raise rates and prevent the economy from running too hot," per The Wall Street Journal. Now, "officials have signaled they are likely to back off from the more ambitious employment goal that returns the Fed to some version of the framework that existed before the more novel changes." (This isn't some sort of ad hoc revision, but rather the Fed committing to its plan to review the framework every five years or so.)
