Fed Chairman Jerome Powell faces a serious dilemma ahead of Jackson Hole’s speech on Friday.
City director and global economist Robert Sockin told Bloomberg’s surveillance that increased tariffs on inflation are worried about Powell, and recent labor market data will increase the likelihood of interest rate cuts in September.
Sockin said it would be difficult for Powell to establish a clear direction in his speech, saying, “Powell is currently under political pressure. A lot of data will be released before the September meeting. Therefore, it is unlikely that he will be leaning strongly in one direction in his speech.”
The economist said the Fed will prioritize growth in coming periods despite rising inflation. Sokkin said, “We expect core inflation to reach 3% by the end of the year. This rate is above target, but the Fed may implement some interest rate cuts to support growth against the risks of a recession.”
Sokkin highlighted the slowdown in the labor market and the imbalance in supply and demand, and predicted that Powell would highlight the issue in his speech. However, he said the Fed would not be much troubled by an inflation rate of around 2.25%-2.5%.
According to Sockin, Powell’s Jackson Hole speech “is more a careful assessment of economic outlook than a surprise.” The potential for interest rate reductions will depend heavily on the trajectory of inflation and the impact of trade policy over the coming months.
*This is not investment advice.
