Fed Rate Cut Expectations Intensify Ahead of Powell Speech

Finance experts at Bloomberg are analyzing the Federal Reserve's upcoming policy meeting, with investors betting on a 0.5% interest rate cut. Despite recent inflation data, the market remains optimistic about a rate reduction, with some traders reducing their expectations of a 0.25% cut in September. The Fed's chairman, Jerome Powell, is set to make key remarks at the annual meeting in Jackson Hole, Wyoming.

Investors are closely monitoring the Federal Reserve's upcoming policy meeting, with expectations for a 0.5% interest rate cut. Despite recent inflation data, the market remains optimistic about a rate reduction, with some traders reducing their expectations of a 0.25% cut in September. The Federal Reserve's chairman, Jerome Powell, is set to make key remarks at the annual meeting in Jackson Hole, Wyoming, on August 21-23.

The Jackson Hole Symposium, hosted by the Federal Reserve Bank of Kansas City, attracts the world's most influential central bankers. This year's conference, titled "Labor Markets in Transition," will focus on structural forces such as demographics, productivity, and technology. Powell's speech is anticipated to provide insights into the Federal Reserve's economic outlook and policy framework review [3].

Markets had been nearly certain that the Fed would cut rates in September, but recent producer price data have weakened these odds. While investors still see an 85% chance of a cut, Bank of America now expects rates to hold, warning that tariffs and sticky inflation could keep policy tighter for longer [1]. The Federal Open Market Committee (FOMC) will be closely watched for any changes in its stance.

US Treasury Secretary Scott Bessent believes the interest rate cut is long overdue and has urged the Fed to start slashing rates by 150 to 170 basis points. He criticized the current rates as "too restrictive" and argued that cuts should have occurred earlier [2]. However, the Fed's independence has been defended, with Powell's term as chair ending next May.

Investors are also keeping an eye on the upcoming jobs report, which could influence the Fed's decision. A better-than-expected consumer inflation report added to confidence, but core inflation has inched over 3%. The July producer price index (PPI) showed the fastest increase since March 2022, hinting at tariff pass-through into the domestic economy [1].

The market's surety of a cut has grown, expecting the FOMC to rush to the aid of the maximum employment side of its dual mandate. However, the data has been enough to push some analysts to side with the minority: that Powell will announce no change to the base rate next month [1].

The Jackson Hole Symposium is expected to be a pivotal event in shaping monetary policy for the remainder of 2025. Powell's remarks will provide key insights into the Fed's stance on inflation, employment, and the broader economic outlook.

References:
[1] https://fortune.com/2025/08/18/powell-jackson-hole-cut-preview-chances-lowering-inflation/
[2] https://blockzeit.com/treasury-sec-bessent-calls-for-150-to-170-bp-interest-rate-cut/
[3] https://www.livemint.com/economy/jerome-powell-will-make-his-last-stand-at-jackson-hole-11755395794625.html