Interest rates in focus at Jackson Hole

By the OFX team | 11 September 2025 | 6 minute read

The Jackson Hole Economic Symposium, is an annual gathering convened by the Federal Reserve Bank of Kansas City, at which the invited participants meet to discuss the global economic issues of the day, the implications, and canvass policy options about the symposium topic.

Why the symposium matters for markets

The Symposium is traditionally addressed by the incumbent Federal Reserve chair, which makes it a big set-piece event in the annual economic and fiscal calendar. Markets try to anticipate (or are construed as trying to anticipate) what the Fed chair will say.

This year, Jerome Powell’s address to the Symposium took on added significance in light of the shock to the global system of President Trump’s tariff policies, trade turmoil, the domestic impact of The One Big Beautiful Bill Act and the perceived regime shift as the US retreats from its post-WWII leadership role.

Trump’s policy goals and interest rate pressure

Trump says, that the tariffs and The One Big Beautiful Bill Act will usher in an economic golden era for the United States, driven by returned and reinvigorated manufacturing, and cheaper energy. Part of his vision appears to be that US interest rates should be cut.

The Fed has kept interest rates steady so far this year after a series of reductions in the second half of 2024, that cumulatively stripped one full percentage point from US rates, to a target interest rate range of 4.25%–4.5%. The first of these cuts – a 50-basis-point reduction in September 2024 – was the first cut in more than four years.

President Trump has said that he wants borrowing costs that are more than three percentage points lower than the current range of 4.25%–4.5%.¹ Trump has been pushing the Fed for months to lower rates to 1%, claiming that Powell is “hurting the housing industry very badly.” So far, the Fed has not acted on these calls, saying it needs to see the effects of tariffs flow through the economy, and assess the employment side of its dual mandate, under which it is charged with fostering a strong labour market and controlling inflation.

In the Presidential vision, inflation is not considered a problem, and the Fed should cut interest rates in an effort to boost economic performance, reduce interest payments on government debt and bring down home-mortgage costs (the average mortgage interest rate is close to 6.6%)². But it appears unlikely that rates will return to such a level any time soon.

Inflation data and the Fed’s assessment

Eight times a year, the Federal Open Market Committee (FOMC) – comprising the Federal Reserve Board’s seven governors, the president of the New York Fed, and a rotating set of four presidents from the other Federal Reserve banks – meets to assess monetary policy. Under Chair Powell, the Fed maintains that inflation is still above its 2% target, which it has held since 2012³.

The latest official data showed that US consumer prices rose by 2.7% in the year to July, the same pace as in June, as lower energy costs offset price rises for items such as coffee, tomatoes and tools. But instead of focusing on this ‘headline’ consumer price index (CPI) number, the Fed typically refers to the ‘core’ inflation figure, which excludes volatile food and energy prices, to gauge underlying inflation trends. Core inflation was 3.1% year-over-year in July 2025, an increase from 2.9% in June, and the monthly core CPI figure rose by 0.3% – the fastest pace since February. That is what is concerning the Fed.

So, the central bank has been reluctant to cut interest rates. That is one thing, but Chair Powell has specifically cited the risk of inflation linked to Trump’s trade policies as a factor behind his decision not to lower interest rates. At the outset of August, he said: “Higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen.”⁴

In Donald Trump’s view, that is overt criticism of his policies.

There has been a flurry of messages on Truth Social, the social media platform owned by Trump Media & Technology Group (TMTG), for most of Trump’s second term, in which the President has expressed his negative view of Powell’s performance in his role as Chair.

It is astonishing stuff, completely unpresidential in its nature.

Presidential and Fed disagreements

There’ s no rule that Presidents and Fed Chairs should always see eye-to-eye: President Truman replaced Marriner Eccles as Fed chair in 1948 (he continued to serve as a Fed governor until 1951)⁵, and disagreements have even become physical: in December 1965, President Lyndon B. Johnson summoned Fed Chair William McChesney Martin Jr. to his Texas ranch, where he reportedly gave him a tongue-lashing and shoved him against a wall.⁶ (LBJ was also considering firing the Fed Chair, for lifting interest rates when the President wanted them lowered.) 

But it is the level of constant, public criticism from the current Oval Office incumbent that stands out. Trump has even suggested he may allow a “major lawsuit” over costly renovations at the Fed’s Washington headquarters – Trump has alleged that the renovation cost has ballooned to $3 billion, when it should only have been $50 million. Powell has pushed back on this front, saying that Trump’s figure wrongly includes a separate building finished years ago⁷.

The Federal Reserve’s independence and mandate

Personal views aside, the Fed has to be seen as independent. Created by an Act of Congress in 1913, the US Federal Reserve has been considered an independent central bank since March 1951, when it and the US reached an agreement to separate government debt management from monetary policy⁸. A president can influence Fed policy, but only insofar as the office’s ability to nominate members of the seven-person Federal Reserve Board of Governors, subject to confirmation by the Senate.

Key messages from Powell’s Jackson Hole speech

To give him his due, Powell is widely seen as a symbol of Fed independence, even in the face of one of the most sustained and personal disagreements ever seen between a President and a Fed chair. Although no-one has (yet) been shoved against a wall, it is the most overt ‘heavying” of the Fed ever seen. The spat has spooked financial markets, and may contribute to only likely to cause further uncertainty and instability, as it calls into question the independence of the US central bank.

As these issues swirled, Powell arrived at the lectern at Jackson Hole.

So, what did he say?

The speech was widely construed as signally openness to a rate cut in September, in a gamble that lower rates might buttress a weakening jobs market, without unleashing inflation⁹. Powell was also widely understood to have hinted that the 2% per cent inflation target may be is less of a priority now for the central bank¹⁰.

But Powell also explicitly stated that “we cannot say for certain where rates will settle out over the longer run, but their neutral level may now be higher than during the 2010s.¹¹”

What does that mean for currencies?

While markets jumped on the short-term implications of a potential rate cut, with equities surging and the US dollar falling, the message from Jackson Hole may have been that the neutral US interest rate may be structurally higher going forward than the level to which markets have become accustomed.

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