Jackson Hole Pushback Unlikely to Stop September Rate Cut

Federal Reserve Chair Jerome Powell will take the stage at Jackson Hole on Friday with one priority: managing expectations. 

He’ll want to cool talk of a September rate cut, and he will not wish to give the impression that the Federal Open Market Committee has already made up its mind. But despite that likely caution, I believe the probability of a move in September is rising.

The case for a rate cut has strengthened over the past month. The US labour market, which had been one of the most reliable pillars of resilience, has shown clear signs of fatigue. 

The July payrolls report added only 73,000 jobs, far below forecasts of 100,000. More striking were the revisions: more than 250,000 positions erased from earlier estimates, leaving May and June essentially flat. The unemployment rate has crept up to 4.2%.

Revisions of that magnitude are not a footnote—they change the story. For much of this year policymakers had been basing their assessments on employment numbers that now appear overstated. 

The economy looks weaker than previously thought. Treasury yields responded accordingly, moving lower across the curve as investors recalibrated expectations. Fed funds futures now imply roughly a two-thirds chance of a September cut.

Inflation data has also been moving in the Fed’s favour. Instead of showing a worrying re-acceleration, recent prints have undershot forecasts. This offers the central bank more cover if it chooses to pivot. 

At the same time, the Atlanta Fed’s GDPNow tracker is pointing to softer growth. Combined with the labour market revisions, these developments create a very different macro backdrop than the one Powell described only a few months ago.

Still, Jackson Hole is not the venue for pre-committing to action. The annual symposium is where central bankers set broad themes rather than announce decisions. I expect Powell to emphasise the importance of incoming data, to remind markets that the committee is not unanimous, and to stress that the Fed retains flexibility. He may even sound more hawkish than conditions justify, simply to prevent investors from racing too far ahead.

This is the communication challenge. Markets react not just to policy actions but to tone, nuance, and body language. If Powell closes the door firmly on near-term easing, risk assets could wobble. If instead he opts for guarded caution, investors are likely to conclude that September remains live.

There are also political cross-currents. President Trump has been vocal in his demand for lower borrowing costs, and Treasury Secretary Scott Bessent has echoed those calls. The central bank insists on its independence, and rightly so, but market psychology does not operate in a vacuum. 

When the White House amplifies a message, it influences perception—even if the Fed resists the pressure.

What seems clear is that the Fed has more options now than it did earlier in the summer. The weakness in jobs, the cooling of inflation, and the slower growth signals together make the debate more fluid. Whether the Fed acts in September or later, the direction of travel appears to be shifting.

For investors, the first move in a new policy cycle often matters more than the size of the cut itself. It can trigger adjustments across asset classes. Growth and technology stocks often benefit as discount rates decline. Emerging markets can attract inflows if the dollar weakens. Bond markets typically reposition rapidly, and volatility can increase as participants try to anticipate the Fed’s pace.

None of this should be taken as advice. Markets remain data-dependent, and the Fed is deliberate. It’s entirely possible Powell and his colleagues decide to wait beyond September, especially if they want more evidence before acting. But the probability of action has risen in light of the new numbers.

Ultimately, Jackson Hole is about shaping narratives rather than announcing decisions. Powell will not hand Wall Street a green light. He will hedge, he will caution, and he will keep optionality. Yet the underlying economic data is sending its own message.

That is why, in my view, despite the likely pushback on Friday, the chances of a September rate cut are building. It is not guaranteed, but it is increasingly plausible.

Investors should watch carefully how Powell frames the debate in Wyoming. His words will shape sentiment going into the September 16–17 meeting, but the hard data will remain the most powerful force in determining the next step.