Fed Chair Jerome Powell used Jackson Hole to set the stage for a policy shift. He left the door open to a rate cut at the Sept. 16–17 FOMC meeting, noting that “the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.”
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The speech painted a split-screen economy:
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• Labor: Powell said the job market is in a “curious kind of balance,” with both supply and demand for workers slowing. That balance, he warned, carries rising downside risks to employment.
• Inflation: Tariffs are expected to create a “one-time” upward shift in prices, but near-term risks remain tilted to the upside.
• Policy: The Fed quietly scrapped its old framework of targeting inflation “averaging 2%” and only responding to employment “shortfalls.” The new framework is looser, giving the Fed more discretion to move as risks evolve.

Markets heard one thing: Powell is preparing to ease. Treasuries ripped higher with the 2Y yield down 12bps, the dollar broke below key technical levels, gold and Bitcoin rallied back above support, and small caps surged more than 3% on the week. The Dow hit fresh record highs, even as mega-cap tech closed lower.

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