Federal Reserve Chair Jerome Powell is about to face the biggest stage of his career. Next week, he will deliver his annual speech at Jackson Hole, the Wyoming summit where central bankers from around the world gather. It won’t be a long speech, last year’s lasted barely 15 minutes. But this year, the weight behind his words could define how history remembers him.
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Powell’s term as Fed chair ends next May. Between now and then, he has two battles to fight at once: steering a slowing economy through tariffs and stubborn inflation, and defending the Fed’s independence against relentless pressure from President Donald Trump. Jackson Hole may not decide his fate, but it will set the tone for the months ahead.
Trump Has Turned Powell into a Political Punching Bag
Trump has turned Powell into a political punching bag. In recent weeks, he has called the Fed chair a “stubborn MORON” and mocked him as “Too Late” for refusing to slash interest rates quickly. He even accused Powell of mishandling the $2.5 billion renovation of the Fed’s headquarters and has openly floated firing him.
For Trump, the calculation is simple economics. Mortgage rates are high, affordability is at record lows, and tariffs are reshaping prices. He wants fast and aggressive rate cuts. But Powell has refused, worried that Trump’s tariffs could ignite another round of inflation. In July, inflation was running at 2.7%, above the Fed’s 2% target, and wholesale prices showed signs of climbing again. Powell’s caution has put him squarely in Trump’s crosshairs.
The White House, meanwhile, is already vetting potential replacements, people seen as more willing to cut quickly and, in some cases, restructure the Fed itself.
If Powell Gives in, the Fed’s Credibility Will Be Put to Test
If Powell gives in to political pressure, it could damage the Fed’s credibility for years. There’s a reason central banks are meant to be independent: once politicians dictate rates, inflation can spiral. History offers grim examples. In the 1970s, Richard Nixon pushed the Fed to keep rates low before an election, fueling inflation that later soared into double digits. More recently, Turkey’s president fired governors who raised rates, sending inflation over 80% and destroying the lira.
Powell knows this history well. His legacy depends on not repeating it.
Powell’s Career Is on the Line
Powell joined the Fed in 2012 and took the chair in 2018 after Trump nominated him. He was reappointed by President Joe Biden in 2022. Over his tenure, Powell has faced one crisis after another: the COVID-19 crash, the fastest recovery in modern times, and then inflation running to 9.1% in 2022—the highest since the early ’80s.
At first, Powell called that inflation “transitory.” He was wrong, and the Fed had to launch one of the most aggressive tightening cycles in history, hiking rates 11 times to more than 5%. It was painful, but it worked. Inflation fell sharply, and the U.S. avoided the deep recession many predicted. By Fed standards, it looked like a rare soft landing.
But the job is not finished, as growth has slowed, employers added only 73,000 jobs in July, and wage growth has cooled. At the same time, tariffs are starting to lift import costs, and inflation has edged higher again. Powell is caught in a dilemma on whether to cut rates and risk reigniting inflation, or hold steady and risk higher unemployment.
What to Expect at Jackson Hole
Powell won’t announce a September rate move at Jackson Hole. But his speech, titled “Economic Outlook and Framework Review,” will send important signals. The Fed is currently reviewing how it approaches employment and inflation, and Powell will use this moment to lay out how the central bank thinks about trade-offs in a volatile, politically charged environment.
Treasury Secretary Scott Bessent has already suggested the Fed should cut by half a percentage point in September. Futures markets give more than 90% odds of a quarter-point cut. But Powell has hinted that tariffs complicate everything. As he put it in July: “You have to think of this as still quite early days” for tariff-driven inflation.
Essentially, Powell wants space to decide what to do without being boxed in by the White House.
For Powell, Jackson Hole is a test of whether he can hold the line on Fed independence. If he bends to Trump’s pressure, markets will assume the Fed is no longer truly independent. That could weaken the dollar, rattle global confidence, and make rate moves far less effective.
If Powell pushes back, he risks inflaming Trump further. But he may also cement his legacy as the Fed chair who kept the institution breathing on its own, even under political fire.
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