Thinking of serving: Three Questions Waiting for Jay Powell in Jackson Hole
American central banking world which is extraordinary and okay goes to the annual Jackson Hole Conference Fed. And for Chairman Jerome Powell, his appearance could barely come at a more challenging time. James Smith sees the questions faced by the Fed boss that is fought as a supporting financial market for the next week
Three Questions Waiting for Jay Powell at Jackson Hole
You should feel for Jay Powell. This is August. He was heading for his annual annual to Middle-of-Nowhere in American Wilderness. Maybe some of Martini’s espresso, strange panel discussions on niche academic topics that are not really caring?
Unfortunately not, because this year, Fed’s chair is on the back foot – and not just because the boss breathed around his neck. Here are three key questions that he will face in Jackson Hole’s appearance next week.
1 Does the tariff have an impact on inflation?
The Fed is worried that the tariffs once for prices to trigger durable inflation. But this week’s CPI data raises a simpler question: is there a sign that the tariff that lifts the price? The core of CPI rises faster every month, but not because of the tariff. Not including cars, inflation of goods is lighter than in July.
Someone must pay, of course. And my rear-envelope calculation places 2.5% of consumer expenses. But the price of imports is still rising, which tells us that we are not foreign producers who maintain bills. That makes the company absorb hit. As our man in New York, James Knightley, tells us during our latest webinar this week, part of the hiking price of small companies changed slightly from last November.
It implies that the company only has no price power to continue all this, something that is certain bad news for growth and income. But strangely, the producer price data shows retail and wholesale margins were expanded in July.
So the jury came out who paid. And there may be a simpler explanation, namely that the company relies on the inventory built earlier this year, postponing the need to lift prices. Retail inventory has dropped slightly this year, especially in Autos, which, even though the tariff is large, really down the price.
Some further inflationary pressures cannot be avoided. But with the main fields of service sector – especially leasing – determined for slower price increases over the next few months, inflation does not need to be a barrier to cutting the tariff in September.
2 Is the job market really not getting weaker?
Only two weeks ago Powell told us that he did not think the job market was getting weaker. And then almost 48 hours later, a large revision down to the payroll does not only suggest that the work market is very weakened, but also has the potential to tease with a recession.
At least Powell doesn’t need to talk about this in Jackso – sorry, what is that? The entire conference entitled “Labor Market in Transition”? Ah, awkward …
So what should he say? You must imagine he will double his argument that the unemployment rate is a guide that is far better than the health of the job market than the current payroll. And has the potential that the president’s immigration rules support the supply of workers, creating a more nuanced background for the surprising work figures of May/June.
The problem with the narrative, as stated by James K on the webinar, is that if there are shortcomings of workers who really appear, you will see the impact of playing in higher wage growth. And that doesn’t happen now.
He tends to take a new salary – new with a nominal value, especially considering that several other surveys – such as ISM services and the Michigan University’s confidence index – also refer to a weaker recruitment background.
3 How much broke up the September meeting?
Okay, we have not faced the original elephant in the room: Powell’s tug-of-war with the White House for independence that was fed. September meeting can be an explosion.
Minister of Finance Scott Bessent wants a bold 50BP discount. But as asked by James K on our webinar, can people who are appointed while Stephen Miran encourages more to – and will Fed Council members such as Christopher Waller or Michelle Bowman, both are seen as competitors of future leaders, following?
It might be impossible, and Miran might not even be confirmed on time. And the latest data hasn’t shouted, need to be brave.
Still, the short task can see the preview of how the council can respond to Dovish’s seats. Will they fall into a line or fight? And will Powell survive?
However, at Jackson Hole, Powell faces more direct challenges. September tariffs are fully valued by the financial markets. Does he push back?
Ideally, the Fed wants flexibility, especially with one more job and inflation report. But indicates that now means guessing data – something that does not want to do powell. And that before considering whether he could shake the market confidence in cutting in September, even if he wanted.
Where investors are more divided, apparently, on what happened after September. This week’s webinar audience is roughly divided into three ways to expect one, two or three cuts through the rest of this year. We are very in the last camp, looking for a series of cuts that are a little faster than the current market expected.
Think in the future in the advanced market
United States (James Knightley):
• Jackson Hole/Us Data: Apart from the appearance of Jerome Powell in Jackson Hole, the calendar is relatively light with data related to housing in focus. Lack of affordability (high price and high level of mortgage) means that demand remains less excited. At the same time, we now see pickup in supply, and this has caused the price of houses to fall for three consecutive months on the size of the S&P case shiller. In this environment, housing construction will continue to soften with a profit margin that is further squeezed by immigration controls that limit the supply of workers and tariffs that install a lot of building materials.
English (James Smith)
• Inflation (Weds): Despite the decrease in household energy bills, the main CPI July is likely to take a touch, assisted by further improvement in food inflation. Service inflation tends to be slightly higher, although this tends to be due to a temporary lump of hotel prices around the Oasis concert. That makes the figure more difficult to predict, but also means the Bank of England will take it with a little salt. Reverse Surprise Material, however, will make us more tempted to change our calls to cut the tariff of November.
Sweden (James Smith)
• Riksbank (Wed): We do not expect tariff deductions at this meeting, even though Riksbank keeps the door open to one. Overshooting inflation, even if economic recovery disappoints. We do not expect further easing from Riksbank in the future.
Think in the future in Central and Eastern European
Poland (Adam Antoniak)
• Jul Industry (THU): Although the initial optimism is driven by the leading activity in the midst of concerns over US import rates, the rebound cycle anticipated by Poland has failed to realize. The growth of new outputs is still subdued, with calendar effects (especially variations in the working day) which causes fluctuations around zero in annual terms. Given that July 2025 has the same number of working days as July 2024, we hope that only an increase in marginal output, because the European industry continues to stagnate. Producers’ prices (PPI) have extended their two -year deflation trends, which reflect ons a sustainable weakness in industrial demand.
• Labor Market Jul (WED): The labor market generally remains tight, although the latest data presents mixed signals. While the survey shows reducing wage pressure, wage growth remains tough at a high digit level. At the same time, work continues to decline gradually. We hope that a simple increase in the work-to-month work in July, although the year-to-year-year-old number remains negative. This new uptick is in unexpected unemployment but seems to originate from administrative changes in the operation of the labor office and new obligations for unemployment, which has introduced statistical distortion. Even so, Poland continues to report one of the lowest unemployment rates in the EU, and lack of labor is still widely reported by the business.
Czech Republic (David Havrlant)
• PPI (Monday): Producer prices are expected to be still in annual decline in July, because stronger Koruna stores the price of imported goods with short rope. Requests that are still husband -nails from the main European trading partners do not allow brave prices.
Important events in the advanced market next week
Source: Refinitiv, ing
The main event at Emea next week
Source: Refinitiv, ing
Source: Ing
