Jerome H. Powell, the chair of the Federal Reserve, is on the cusp of taking a big gamble with the U.S. economy.
He and his colleagues must soon decide which of two significant risks takes priority now that the Fed’s goals of low, stable inflation and high employment are in tension with each other. Inflation, still too high for the Fed’s liking, is rising again as businesses navigate President Trump’s global tariffs. The labor market also looks increasingly fragile, with monthly jobs growth slowing nearly to a halt this summer.
If the Fed puts more weight on the threat of resurgent price pressures and holds interest rates steady when it meets next month, that could raise the odds of an economic downturn. If the Fed instead moves to shore up the labor market by restarting interest rate cuts that were put on hold in January, inflation may be more likely to get stuck above the central bank’s 2 percent target.
Mr. Powell’s high-stakes balancing act will be on full display on Friday when he makes his final address as Fed chair to the world’s leading economic policymakers at the foothills of the Teton Range in Jackson, Wyo. His remarks over the past seven years have been the biggest draw of the three-day conference, which is set to kick off on Thursday. Hosted by the Federal Reserve Bank of Kansas City, it has for decades served as the top forum for central bankers, government officials and academics to debate pressing economic issues.
Since Mr. Powell’s most recent public appearance in late July, the prospect of an interest rate reduction in September has risen sharply as fears about the labor market have begun to overshadow lingering concerns over inflation. So has the White House’s pressure on the Fed to substantially lower borrowing costs. On Wednesday, the president expanded his attacks beyond Mr. Powell and called on Lisa Cook, a member of the Fed’s Board of Governors, to resign, citing unconfirmed allegations that she may have engaged in mortgage fraud.
This backdrop leaves Mr. Powell, whose term as chair ends in May, with the tall task of laying the groundwork for interest rate cuts without looking as if he is capitulating to Mr. Trump or turning prematurely sanguine on inflation. He could do that by suggesting the central bank can afford to reduce the degree of restraint it is imposing on the economy without going so far as to endorse outright easing.
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The post Behind Powell’s Big Gamble in Final Jackson Hole Speech appeared first on New York Times.
