US: Powell’s balancing act at Jackson Hole. The 30 Jul FOMC Minutes showed most Fed officials viewed 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, had voted for a rate cut on 30 Jul. Having nominated Stephen Miran to replace Adriana Kugler, who surprisingly resigned on 8 Aug before her term expired in Jan 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 emphasise 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 7 May 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-emphasising this contingency, Powell can maintain his inflation message while leaving the door open for the September cut that is already priced in by markets and potentially for more than one rate reduction if the labour market continues to deteriorate amid limited price pass-through from producers to consumers.
Figure 1: Is inflation a bigger concern over labour?
Source: Bloomberg, DBS
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