Hey network, fresh off Jerome Powell’s Jackson Hole speech earlier today, the Fed Chair delivered a resolute message on taming inflation—echoing the determination highlighted in today’s New York Times recap. With the U.S. economy at a tricky crossroads in 2025, Powell’s words underscored the Fed’s commitment to preventing tariff-fueled price spikes from spiraling into something more pernicious. If you’re tracking markets or policy, this is a must-digest: Let’s unpack what he said, why it matters, and what could come next. (Catch the full transcript on the Fed site—it’s a blueprint for navigating uncertainty .)
Powell kicked off by painting a resilient but evolving economic picture. The labor market? Still near «maximum employment,» with unemployment steady at a low 4.2%—a far cry from last year’s worries . But here’s the nuance: Job growth has tanked to just 35,000 per month recently, down from 168,000 in 2024, thanks to massive downward revisions and a slowdown in labor supply from tighter immigration policies . GDP growth halved to 1.2% in the first half of this year, dragged by softer consumer spending and those same supply-side headwinds . It’s a «curious kind of balance,» as Powell put it, where both demand and supply for workers are cooling—raising downside risks like sudden layoffs if things tip .
The real spotlight, though, was on inflation—and the Fed’s ironclad resolve to keep it in check. PCE inflation sits at 2.6% overall and 2.9% core over the past year, with tariffs clearly jacking up goods prices (up 1.1% after actual declines in 2024) . Powell was blunt: These are likely «one-time» level shifts, not a new inflationary era, but the Fed won’t let them morph into ongoing problems . He downplayed risks of wage-price spirals (labor market isn’t tight) or unanchored expectations, which remain stable and aligned with the 2% target . Still, with tariffs evolving and their effects rippling through supply chains, he flagged the uncertainty—potentially prolonging adjustments and testing that base case .
This ties into the Fed’s freshly revised framework, released today as part of their five-year review . It’s an evolution from 2012 roots, adapting to structural shifts like trade wars, immigration curbs, and policy changes that monetary tools can’t fix directly . Powell emphasized balancing the dual mandate—jobs and prices—especially when they’re in tension, as now with upside inflation risks clashing against downside employment threats . Policy isn’t on autopilot; it’s data-driven, and with rates already down 100 basis points from last year, further tweaks could be in play if risks shift .
Markets were hanging on every word, and for good reason—this being Powell’s likely final Jackson Hole as Chair amid Trump administration pressures to oust him before his 2026 term end. Pre-speech buzz warned of volatility: A hawkish tilt could tank stocks 7-15% (Evercore’s call), while dovish signals might fuel rallies in rate-sensitive sectors. Post-speech? Early reactions suggest a measured tone—acknowledging restrictive policy’s success in cooling inflation from post-pandemic highs, while hinting at flexibility without committing to September cuts . It’s a high-stakes balancing act, confounding the data-dependent strategy with pulls in both directions.
Bottom line: Powell’s speech reaffirms the Fed’s anti-inflation vigilance, even as 2025’s policy upheavals (tariffs, taxes, regulations) complicate the path. Will we see rate adjustments to safeguard jobs without reigniting prices? Or more caution to quash tariff effects?
What’s your read—bullish on cuts, or braced for bumps? Share below, and let’s connect on this.
El Mundo del Trading en los Mercados Financieros 