Wall Street is banking that Powell will signal a rate cut at Jackson Hole—but the closer it gets, the less likely it looks
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Markets bet on a September Fed rate cut at Jackson Hole, but sticky inflation, Trump tariffs, and Powell’s framework review could derail expectations.
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August 18, 2025
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Fortune
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Economy·Federal ReserveWall Street is banking that Powell will signal a rate cut at Jackson Hole—but the closer it gets, the less ly it looksBy Eleanor PringleBy Eleanor PringleReporterEleanor PringleReporterEleanor Pringle is an award-winning reporter at Fortune covering news, the economy, and personal finance
Eleanor previously worked as a correspondent and news editor in regional news in the U.K
She her journalism training with the Press Association after earning a degree from the University of East Anglia.SEE FULL BIO Jerome Powell, chairman of the U.S
Federal Reserve, at the Jackson Hole Economic Symposium in Moran, Wyo., Aug. 25, 2023.David Paul Morris—Bloomberg/Getty Images had been nearly certain the Fed would cut rates in September, but fresh ducer price data are weakening those odds ahead of Chair Jerome Powell’s Jackson Hole speech
While investors still see an 85% chance of a cut, Bank of America now expects rates to hold, warning tariffs and sticky inflation could keep policy tighter for longer
Analysts will be eyeing the back end of this week for the market-moving news
Analysts have long priced in a number of cuts to the base rate in 2025
With just a handful of meetings left to go this year, September has been widely identified as the month when the interest rate will finally be reduced. were hoping for a further signal of their estimations this week, at the Jackson Hole Symposium held by the Federal Reserve Bank of Kansas City
Jackson Hole has previously been the site of tidal changes in monetary policy, with spectators widely expecting Chair Jerome Powell to keep up the tradition at the end of the week
But as the summit draws closer, the data is only shifting further away from a rate-cut scenario, and the lihood of a lower cut is more tenuous
A week ago, the chance of a September cut was being priced in at more than 95% by the market
At the start of a week that might otherwise have solidified that belief, the odds are lower
According to CME’s FedWatch, the chance of the base rate being lower by one click to between 4% and 4.25% now stands at a little under 85%, with a 15.2% chance of a hold. are flat this morning as the events of late last week (namely, President Trump’s meeting with Russian President Vladimir Putin) didn’t do enough to shift the dial on spects for better or worse
Before the bell, the S&P 500 is down 0.3%, the Nasdaq is down 0.4%, and the Dow is up a minor 0.08%
S&P futures are down 0.08%
In Europe the FTSE 100 is flat, Germany’s DAX is down 0.3%, and the French CAC is down 0.6%
In Asia the Nikkei 225 is up 0.77%, the SSE is up 0.85%, and the Hang Seng Index is down 0.37%. have good precedent to be looking toward the end of the week (the symposium is held from Thursday to Sunday) for major economic headlines
As Deutsche Bank noted to clients this morning: “The Fed chair’s speech at Jackson Hole has often been used to send important policy signals, and it was last year that Powell said the ‘time has come for policy to adjust’ before they then cut rates at the next meeting for the first time since the pandemic
This time around, we don’t have the full agenda yet, but the subtitle for Powell’s speech on the Fed’s website says, ‘Economic Outlook and Framework Review,’ so we can expect some insight on those topics.” The notice of framework review is particularly of interest to Henry Allen, a macro strategist at Deutsche
The last time such a framework was in 2020 and resulted in a shift toward average inflation targeting
Essentially, the Fed would look at periods where inflation had been persistently lower than 2% (across the span of the 2010s, for example) and would allow for policy that supported inflation above the 2% target to counteract the timing overall. “The Fed also reinterpreted their apach to full employment, in that a tight labor market alone wasn’t a reason to raise rates
So that implied a move away from the preemptive apach whereby the Fed would tighten policy to get ahead of future inflation as the labor market tightened,” Allen wrote. “Of course, we now know that shortly after the framework review, there was then a major burst of inflation, and although it had many drivers, our U.S. economists in a Friday note that the new framework was a contributor to that overshoot. “So this time around, they expect Powell’s speech to call for rolling back the 2020 modifications and restoring a primary role for preemption.” If the Fed does decide to take a longer-term view on inflation, those hoping for a cut may be disappointed
Since 2021, inflation has stayed persistently above the target of 2%, with analysts suggesting further pressures are coming down the pike courtesy of President Trump’s tariff plan
A shift Not even a week ago, the s of Treasury Secretary Scott Bessent were not only confident of a September cut but also questioned whether a larger cut could be justified
The pressure for a cut came from a shock jobs report from the Bureau of Labor Statistics, which revealed the employment market has been in far worse shape this summer than previously expected
The market’s surety of a cut grew as a result, expecting the Federal Open Market Committee (FOMC) to rush to the aid of the maximum employment side of its dual mandate
A better-than-expected consumer inflation report added to confidence—though most conveniently overlooked the fact core inflation has now inched over 3%
However, July’s ducer price index (PPI) poured a little cold water on the excitement, showing the fastest increase since March 2022 and hinting that while tariff pass-through hasn’t yet fully hit consumers, it’s bleeding into the domestic economy
Indeed, the data has been enough to push Bank of America to side with the minority: that Powell will announce no change to the base rate next month
Global economists Claudio Irigoyen and Antonio Gabriel wrote Friday: “With inflation essentially stuck over the past year, the tariff pass-through that we still expect, and the labor supply story keeping the unemployment rate historically low, we still think there is a strong case for the Fed to remain on hold
We will see next week if Powell holds the line or not, and then focus will shift to the next jobs report.” Here’s a snapshot of the action prior to the opening bell in New York: S&P 500 futures were flat Monday morning
STOXX Europe 600 was down 0.1% in early trading
The U.K.’s FTSE 100 was down 0.1% in early trading
Japan’s Nikkei 225 was up 0.77%
China’s CSI 300 was up 0.88%
India’s Nifty 50 was up 1%
Bitcoin declined to $115.180K
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