25.08.25 - Powell’s tactical game

In his Jackson Hole speech, Fed Chair Jerome Powell struck a careful balance: he acknowledged inflation risks remain tilted to the upside while pointing out that employment is showing signs of weakness. Importantly, he also opened the door to a potential rate cut in September.

Markets: immediately cheered the news

• Nasdaq +1.5%

• US 10-year yield down to 4.25%

• US small & mid-caps +4%

• US dollar stronger

• Gold +1%

My View: Powell’s message feels like a tactical move, aimed at buying time and easing political pressure on both the Fed and himself. He essentially echoed what markets wanted to hear, and what Donald Trump has been demanding for months.

However, if inflation continues to rise, I have some doubts that a September rate cut will materialize. The upcoming inflation data on Friday will be decisive and must be watched very closely.

For now, I remain cautious. While markets are cheering, the underlying risk of stagflation is real and increasingly probable. It seems that some investors start to look from the same angle today as US Futures give up some gains from Friday.

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