WASHINGTON (AP) — Just three weeks ago, Federal Reserve Chair Jerome Powell spoke to reporters after the central bank had kept its key interest rate unchanged for a fifth straight meeting and said the job market was “solid.”
His assessment was important because if the job market is healthy, there is less need for the Fed to cut its key interest rate, as President Donald Trump has demanded. Two days later, the Labor Department issued a report that cast doubt on that assessment, showing hiring was weak
in July and much lower than previously estimated in May and June.
So, there will be a lot of attention paid by Wall Street and the White House to Powell's high-profile speech Friday at the Fed's annual economic symposium in Jackson Hole, Wyoming. If the famously data-dependent Powell shifts gears and takes a gloomier view of the job market, that could open the door for a rate cut at the Fed's next meeting in September.
Powell could also stick to the cautious approach he's maintained all year and reiterate that the central bank needs more time to evaluate the impact of Trump's sweeping tariffs on inflation.
Most economists expect Powell to signal that a rate cut is likely this year, but won’t necessarily commit to one next month. That could disappoint Wall Street, which has put high odds on a September cut.
Powell's speech, his last address at Jackson Hole as chair before his term ends in May, will occur against a particularly fraught backdrop. About a week after the jobs numbers, the latest inflation report showed that price growth crept higher in July. Core prices, which exclude the volatile food and energy categories, rose 3.1% from a year ago, above the Fed's 2% target.
Stubbornly elevated inflation pushes the Fed in the opposite direction that weak hiring does: It suggests the central bank's short-term rate should stay at its current 4.3%, rather than be cut. That would mean other borrowing costs for mortgages, auto loans, and business loans, would stay elevated.
“So the plot has thickened,” said David Wilcox, a former top Fed economist and now director of economic research at Bloomberg Economics and also a senior fellow at the Peterson Institute. “The dilemma that the Fed is in has become, if anything, more intense.”
Powell is also navigating an unprecedented level of public criticism by Trump, as well as efforts by the president to take greater control of the Fed, which has long been independent from day-to-day politics.
Most observers credit Powell for his nimble handling of the pressures. An iconic moment in his tenure was Trump's visit to tour the Fed's renovation of its office buildings last month. Trump had charged that Powell mismanaged the project, which had ballooned in cost to $2.5 billion, from an earlier estimate of $1.9 billion.
With both the president and Fed chair in white hard hats on the building site, in front of cameras, Trump claimed the cost had mushroomed even further to $3.1 trillion. Powell shook his head, so Trump handed him a piece of paper purporting to back up his claim.
Powell calmly dismissed the figure, noting that the $3.1 billion included the cost of renovating a third building five years earlier.
“That was just such a classic Powell,” said Diane Swonk, chief economist at KPMG. “He just doesn't get fazed. He's got a humility that oftentimes I think is lacking among my colleagues in economics."
Powell appeared to at least temporarily assuage Trump during the tour, after which the president backed off his threats to fire the Fed chair over the project.
The attacks from Trump are the latest challenges for Powell in an unusually tumultuous eight years as Fed chair. Not long after being appointed by Trump in 2018, Powell endured the president's criticisms as the Fed slowly raised its key rate from the low levels where it had remained for years after the 2008-2009 Great Recession.
Powell then found himself grappling with the pandemic, and after that the worst inflation spike in four decades that occurred as government stimulus checks fueled spending while crippled supply chains left fewer goods available.
Powell then oversaw a rapid series of rate hikes that were widely predicted to cause a recession, but the economy continued plugging ahead.
In his latest attempt to pressure the Fed, on Wednesday Trump called on Fed governor Lisa Cook to step down, after an administration official, Bill Pulte, accused her of mortgage fraud. Pulte is head of the agency that regulates mortgage giants Fannie Mae and Freddie Mac.
Cook said in a statement that she wouldn't be “bullied” into resigning and added that she was preparing to answer the charges.
For Powell, there's a difficult decision to make on interest rates. The Fed's “dual mandate” calls for it to keep prices stable while seeking maximum employment. But while the weak jobs data suggest the need for a cut, many Fed officials fear inflation will get worse in the coming months.
“There is still a fair amount that’s still outstanding,” Raphael Bostic, president of the Fed's Atlanta branch, said in an interview, referring to tariff-led price hikes. “One feedback we’ve gotten both in our surveys and from direct conversations (with businesses) suggests that many still are looking to see the price that they charge their customers increase from where we are today.”
Other economists, however, point to the sharp slowdown in housing as a sign of a weak economy. Sales of existing homes fell in June to their lowest level in nine months amid elevated mortgage rates. Consumer spending has also been modest this year, and growth was just 1.2% at an annual rate in the first half of 2025.
“There’s not a lot to like about the economy right now outside of AI," said Neil Dutta, an economist at Renaissance Macro. “The weakness in the economy isn't about tariffs,” but instead the Fed's high rates, he added.
