Powell’s Jackson Hole Finale: What It Means for Markets

Author: Andrew Gabriele

Every August, the world’s central bankers, economists, and policymakers gather in a place I call home: Jackson Hole, Wyoming. The Federal Reserve’s annual symposium, hosted by the Kansas City Fed, takes place at the Jackson Lake Lodge in Grand Teton National Park.

The tradition began in the early 1980s, when organizers sought to entice then–Fed Chair Paul Volcker, an avid fly fisherman, to attend. Moving the event to Jackson Hole worked; Volcker came, and the conference has remained here ever since. The secluded mountain setting fosters candid conversations about long-term policy challenges, far removed from the pressures of Washington.

As a Jackson local and fly fisherman myself, I enjoy watching the world’s most powerful monetary policymakers converge just up the road. (Most visitors exploring Yellowstone or the Tetons are unaware that the conference is even happening.) This year’s gathering was especially notable because it marked Chair Jerome Powell’s final Jackson Hole appearance before his term ends next May. Investors worldwide listened closely to ascertain how the Fed is balancing growth, inflation, and employment during this delicate point in the cycle.

Powell adopted a cautious but clearly dovish tone. He observed that the economy has slowed significantly in 2025, with GDP rising only 1.2% in the first half—about half the growth rate of 2024. Job creation has decreased even more sharply. Payrolls increased by an average of just 35,000 per month over the past three months, a small fraction of last year’s trend, with downward revisions indicating the slowdown is more severe than originally thought. Unemployment stays relatively low at 4.2%, but Powell described today’s labor market as an “unusual balance,” where both supply and demand for workers are cooling. He warned that this situation increases downside risks to employment, which could quickly turn into layoffs or rising unemployment.

Regarding inflation, Powell directly attributed it to tariffs. He said their effects are “now clearly visible” in prices, with core PCE inflation at 2.9% in July. However, he mainly described this as a one-time level shift rather than a sign of ongoing, accelerating price pressures. Services inflation, especially outside housing, remains stronger than the Fed prefers, but Powell indicated that inflation expectations remain anchored, giving the Fed some flexibility.

Taken together, Powell described the situation as “challenging”: inflation risks still favor the upside, while employment risks lean to the downside. With the policy rate remaining restrictive at about 4.3%, he stated that “the shifting balance of risks may warrant adjusting our policy stance.” In plain English, Powell suggested the Fed might cut rates as soon as next month, while emphasizing that monetary policy is not on a preset path and that upcoming data will determine the course.

Markets quickly responded to the change in tone. On Friday, equities rose, with the S&P 500 up 1.5%, the Dow nearly 2%, and the Russell 2000, which is particularly sensitive to changes in financing conditions, climbing almost 4%. Treasury yields declined about ten basis points at the short end, and the dollar weakened. Behind the scenes, futures markets adjusted swiftly. As of Monday, August 25th, the CME FedWatch tool indicates the market is pricing in an 82% chance of a quarter-point cut at the Fed’s September 17th meeting, a significant increase from just a few weeks earlier.

For investors, Powell’s Jackson Hole speech confirms that policy is at a turning point. The Fed seems more willing to counter the risk of a weakening labor market, even as it recognizes that inflation has not yet fully returned to target. However, Powell also made it clear that the Fed is not claiming victory. Service-sector inflation remains persistent, and tariffs could still complicate the situation. This suggests that volatility is likely to stay high as new data influences expectations.

The Fed also used the Jackson Hole stage to update its long-term policy framework. While the technical details might be less relevant for daily markets, the message was significant: the Fed reaffirmed its 2% inflation goal and moved away from its “average inflation targeting” experiment that focused on overshooting 2% in some cases. The new statement reflects lessons learned from the pandemic era, mainly that inflation can reemerge quickly and policy needs to remain flexible.

From a portfolio perspective, the key takeaway is not to overreact to one speech or one week of market moves. Lower rates, if they come, may provide support for equities and credit markets, but the underlying story is an economy that is slowing from last year’s pace. A balanced allocation across asset classes remains the prudent approach. Chasing short-term rallies in small caps or highly cyclical sectors is not something you’ll see us do in client portfolios. The better path is to remain diversified and focus on long-term objectives while allowing the Fed to do its work of balancing risks.

Powell’s final Jackson Hole address was emblematic of his tenure: cautious, data-driven, and mindful of both sides of the Fed’s mandate. For me, it was also a reminder of the unique role Jackson Hole plays in shaping the global conversation about monetary policy. I feel fortunate to live here, where this historic symposium has been held for over four decades.