Federal Reserve Chairman Jerome Powell will speak at Jackson Hole in Wyoming on August 22, 2025.
David A. Grogan | CNBC
The Federal Reserve will meet with some major items on the agenda this week. Coupled with key fee decisions and forecasts for the future, along with a healthy amount of political conspiracy, which is unusual for central bank policymakers.
On the currency side, the Federal Open Market Committee on Wednesday will announce a ruling on where to set the overnight borrowing rate. Additionally, staff will sketch out the future outlook for rates closely followed by the “dot plot” grid.
Political, there is Stephen Milan, the appointee of President Donald Trump, and one new Fed governor. Stephen Milan almost certainly opposes the widely anticipated decision to cut the federal funding rate by a quarter point and opts for a bigger cut. Others can vote against the move as well, and even vote against the cuts as officials are softening in the labour market for concerns about tariff-induced inflation.
So, although the rate decision is pretty much in the bag, it’s someone’s guess what will happen from there.
“The goal of the Fed’s double mission is “tension” and there’s a good chance that we’ll move further,” said John Bellis, an American strategist at BNY. “The addition of an increased politicization of the Fed has made things complicated for central banks.”
Push a big cut
The two-day meeting began on Tuesday with the oath of new governor Stephen Milan, chairman of the Economic Adviser Council and stubborn critic. The Senate confirmed on Monday that Milan will serve the remainder of the former Adriana Cooler term running through January.
He has not explicitly stated where he will vote, but Milan is expected to defy the committee’s decision to progressively reduce its decision. Trump once again urged the committee and chairman Jerome Powell to actively lower the bill on Monday, and in a social media post, the FOMC said “we have to cut interest rates now and now and even greater.” [Powell] I had kept it in mind. ”
In an interview with CNBC on Tuesday, Treasury Secretary Scott Bescent encouraged the Fed to offer a “full thumb” cut.
“President Trump is very sophisticated economically and I think he was right on almost every turn,” he said. “The problem is that the Fed was behind the curve. I hope they start catching up in a rather surprising way.”
While Fed watchers expect Trump appointees Christopher Waller and Gov. Michelle Bowman could also support and oppose the bigger move, Kansas City may choose to not like cuts by President Jeffrey Schmidt and perhaps St. Louis Fried President Alberto Musalem, but nothing is certain.
Regardless of the White House demands or the cracks in the FOMC, the market is strongly betting that the Fed will stick to a quarter, or 25 basis points, from its current target range of 4.25%-4.5%. From there, traders are allocating more than 70% reductions in both October and December, according to CME Group’s FedWatch tool, which uses the 30-day Fed Reserve Fund Futures Contract Price to evaluate CME Group’s FedWatch tool.
“The opposition highlights the divisions that appear in the committee, but still leaves us with a much larger centre group that agrees that it is time to commence the recalibration process by under 25. [basis points] In September, Krishnaguha, head of Evercore ISI’s Global Policy and Central Bank Strategy, wrote.
That pace may not be enough to satisfy Trump. In addition to confirming Milan, Trump has also called for the expulsion of Gov. Lisa Cook, indicating that in May 2026, Powell will be replaced by the chairman when his term expires.
Focus on Powell
But it follows the expectations of most economists.
“The key question at the September FOMC meeting is whether the committee will show that this is likely the first in a series of consecutive cuts,” Goldman Sachs economist David Merrick said in a memo. “The statement hopes to acknowledge softening in the labour market, but we don’t expect any changes to policy guidance or a nod to the October cut. However, Chair Powell may softly hint in that direction at a press conference.”
Mericle expects the dot plot to signal two cuts rather than two cuts “although it’s a narrow margin.”
In fact, Powell’s choice of words in a post-meeting parley with reporters is often more important than the FOMC statement. In addition to the release of statements and dot plots, authorities will update forecasts for gross domestic product, unemployment and inflation.
At Jackson Hole, a Wyoming speech in August, Powell hit a slightly cut-off tone.
“It sounds like he did at Jackson Hole, where he says for the first time that the data dependencies that drive decision-making have changed dramatically. We need to adhere to employment delegations more than we need to protect inflationary mandates,” said B. Riley, Chief Market Strategist at Wellness Management, “The tone will be very practical, but it’s more solid than Hawkish.”
