Going into Fed Chair Jerome Powell’s speech at Jackson Hole today, the USD is caught between the Fed’s caution and the White House’s push for lower interest rates. The July 30 FOMC Minutes showed most Fed officials viewing the tariff passthrough into inflation as the bigger risk than weak jobs. However, at the time, Fed officials were handed a stronger-than-expected June nonfarm payroll print of 147k, later revised down sharply to just 14k, with the unemployment rate rising back to 4.2% in July after a dip to 4.1% in June.
Meanwhile, US President Donald Trump is pressing ahead with efforts to reshape the seven-member Fed’s Board of Governors to align with his easing agenda. Two of his appointees, Michelle Bowman and Christopher Waller, already voted for a rate cut on July 30. Having nominated Stephen Miran to replace Adriana Kugler, who surprisingly resigned on August 8 before her term expired in January 2026, Trump has called for Lisa Cook’s resignation over allegations of mortgage fraud. While Cook indicated no intention to be bullied into leaving the Fed, Federal Housing Financing Agency Director Bill Pulte will likely proceed to urge Attorney General Pam Bondi to investigate the matter.
The Minutes suggest that most Fed officials will rally behind Powell’s cautious, data-dependent approach in lowering rates. Global central bankers attending Jackson Hole will likely emphasize that the credibility behind controlling inflation hinges on upholding central bank independence.
However, Powell may acknowledge sharply weaker jobs data released after the July meeting. In his May 7 post-FOMC press conference, Powell said that if unemployment increased in an uncomfortable manner, the Fed would look past supply-side inflation and lean towards supporting the labour market. By re-emphasizing this contingency, Powell can maintain his inflation message while leaving the door open to the September cut already priced in by markets – and potentially to more than one rate reduction if the labour market continues to deteriorate amid limited price pass-through from producers to consumers. If he leans towards labour contingency, Powell could tilt the USD’s tug-of-war towards the downside.
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August 21 in history
In 1911, Mona Lisa was stolen from the Louvre and recovered in 1913.
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