Central bankers left Jackson Hole with no easy answers

The 2025 Jackson Hole summit ended in total uncertainty. The Federal Reserve’s top officials met in Wyoming last week, and nobody left with a clear plan.

According to Bloomberg, Jerome Powell used his Friday speech to hint at a possible interest rate cut in September. But nothing was decided. Everyone’s split. Inflation’s up. Jobs are down. And pressure from the White House is now front and center.

Powell said the Fed was facing a “challenging situation.” He wasn’t joking. The central bank’s 2% inflation target is still being missed, and recent numbers suggest prices are going higher. At the same time, the job market’s taking hits. Hiring slowed sharply over the summer.

While unemployment remains low, demand and supply in the labor market are both falling. Powell described the current labor conditions as “curious,” adding that it’s unclear where things are headed next.

Fed clashes over rate path and political heat

The divide inside the Fed became clearer during the conference. Some members want to lower rates. Others are worried it’s too soon. Chicago Fed President Austan Goolsbee said the hardest part of the job is “to get the timing right at moments of transition.”

And right now, no one agrees on the timing. At July’s meeting, two Fed governors dissented when officials held rates steady. If a cut comes in September, more dissents could follow in the opposite direction.

Powell didn’t sound confident. This year’s speech was weaker than last year’s, when there was stronger support for immediate cuts. Back then, inflation looked like it was fading. Not anymore. Tariffs are now visibly raising prices, and there are signs that inflation is spreading to products and services not directly affected by those tariffs.

Another new detail emerged: Powell introduced a revised policy framework. The Fed has updated its internal guidebook for how it tackles inflation and jobs. The last version, made during the pandemic, focused too much on low inflation.

This one is different. It brings the Fed’s attention back to its basic goals, full employment and price stability. Carolin Pflueger, an associate professor at the University of Chicago Harris School of Public Policy, said Powell’s focus was clear: “His job is inflation and unemployment, and that can only be achieved within an independent Fed.”

Tension grows as Trump targets the Fed

Tensions at Jackson Hole weren’t just about policy. They were also about politics. President Donald Trump used the same Friday morning to go after Fed Governor Lisa Cook. He said Cook should resign or be fired because of allegations tied to mortgage fraud.

Trump has been pressuring the Fed hard to cut rates, and his move against Cook was just another part of that campaign. Security around the event was the tightest it’s been in years. Armed officers from the Fed Police, U.S. Park Police, and the local sheriff’s office patrolled the lodge grounds.

On Friday, they had to escort James Fishback, a known Trump supporter and critic of the Fed, out of the building. Fishback shouted at Cook in the lobby, demanding answers about the fraud accusations.

The political tension didn’t go unnoticed. Harvard economist Karen Dynan, a regular at the symposium, said attendees mostly avoided discussing politics during formal sessions. But it still came up over coffee and meals. She pointed out that serious economic questions require more than gut instinct:

“These are not problems that can be solved by thinking about one’s intuition or talking to just a circle of people around you. You really need this sort of expertise.”

International guests responded fast to Powell’s speech. The euro rose 1% against the dollar right after he spoke. That made things worse for Europe, where inflation is already expected to drop to 1.6% next year.

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