Powell’s Jackson Hole speech: market impacts explained

On Aug. 22, 2025, the Federal Reserve Chairman Jerome Powell delivered a speech on monetary policy and the Fed’s framework. Investor and host of the Wolf of All Streets podcast, Scott Melker, called it “a significant turning point for all markets.” Why so, and what are the deep cuts from this speech noted by market experts?

Takeaways from the speech and the market reaction

Powell gave this speech during the Jackson Hole, Wyoming, at an economic symposium. In the beginning, he reminded attendants about the Fed’s dual mandate to keep inflation rates and unemployment levels low. He suggested that the employment rate is maximum, while inflation is “still somewhat elevated.”

The Fed chair outlined the challenges the U.S. economy faced in 2025:

• International trade policy (as it brings uncertainty about the final tariff levels).

• Tighter immigration policy is abruptly slowing down labor force growth.

Powell suggested that changes in tax, spending, and regulatory policies may have important yet hardly predictable implications. 

As for the labor market, he emphasized that a drop in both supply and demand for workers has downside risks that may materialize in massive layoffs.

Speaking about inflation, Powell noted that some categories of goods have already gotten more expensive. The Fed is expecting that within several months, tariff effects will accumulate and that determining monetary policy will be easier. Powell warns about possible upward pressure on prices from tariffs, boosting inflation further.

Concluding the segment about economic conditions, Powell noted that the Fed is considering changes:

The “hint” at possible rate cuts in September sparked a short-term Bitcoin, Ethereum, gold, and U.S. equity futures rally. However, by Monday, the markets retraced to pre-speech levels.

What caught experts’ attention in Powell’s speech?

Powell didn’t explicitly say that the Fed is going to cut the rates. More than that, he outlined the challenges the Fed is facing. Tariffs are still seen as a factor that may trigger higher inflation. So, why do experts call this speech important?

According to The Wolf of All Streets host Scott Melker, the Jackson Hole speech “marked a turning point,” as the Fed is “signaling the first real opening for rate cuts.”

Chief market investment strategist at MetLife Investment Management, Drew Matus, is more pessimistic. He is concerned that the Fed won’t have too much room to cut rates because of the constant inflation and slow-paced economic growth.

Speaking about the possible reason for the rate cut, CNBC journalist Steve Liesman emphasized that Powell claimed that tariffs are likely to cause a one-time price level increase (which doesn’t mean all at once). According to Liesman, it is a position adopted from Christopher Waller, a Fed governor who voted for rate lowering back in July.

Commenting on the segment of the speech in which Powell claims that the Federal Open Market Committee will make decisions based only “on their assessment of the data” and “will never deviate from that approach,” banking observer and editor Dan Ennis noted, “the last sentence is critical. […] The FOMC, on Powell’s watch, will not be unduly influenced.” This is especially important, given the immense pressure on Powell from Donald Trump and his supporters.

Background behind the feud between Powell and Trump

Changes in the interest rates are one of the crucial factors for the economy. Through the reduction of interest rates, the Fed stimulates the economy as borrowing money from banks gets cheaper. However, lower interest rates are normally associated with increased inflation risks, so the Fed has to walk the tight rope between inflation and unemployment risks while deciding on changing the interest rate.

The rates have been remaining unchanged since December 2024–the Fed keeps them at the 4.25%-4.5% range. Powell and his colleagues from the Fed cited Donald Trump’s tariff policy as the factor that may contribute to inflation. So, throughout 2025, the Fed board members have been consistently reluctant to lower interest rates to ensure inflation won’t go up. While inflation may go down, it is still above the 2% objective set by the Fed.

Opinions over the need for the Fed to cut rates are split. High tariffs discourage exports from the U.S. while helping President Trump to set negotiations with leaders of other countries. To stimulate exports, Trump needs a cheaper dollar, and lowering the interest rates would be the relevant measure. 

While Trump claims that Powell is hurting the housing industry because high interest rates make mortgages expensive, a financial commentator and stockbroker, Peter Schiff, argues that cutting rates is not the solution to the housing market problems. According to him, it will only allow people to borrow more money for buying overpriced houses. Others reminded that cutting interest rates preceded the 2008 financial crisis, which definitely cannot be called a solution to the housing problem. 

Trump has been pressing Powell to cut rates multiple times, resorting to calling him names and discussing the possibility of firing Powell, which could be possible only via support from the Supreme Court. In July, Rep. Anna Paulina Luna (R-FL) referred Powell to the Department of Justice, accusing him of lying under oath. A number of publications called this case “lawfare” against the Fed chairman. Additionally, on Aug. 25, Donald Trump claimed that he fired the Fed governor Lisa Cook, citing allegations over mortgage fraud.

What made the pressure even stronger is the dissent inside the Fed itself. Two of the twelve Fed governors, Michelle Bowman and Christopher Waller, voted for interest rate cuts in July. The latter of them is considered, among other candidates, to replace Powell as soon as his term expires in May of 2026. 

While it’s not clear whether Powell hinted at an upcoming interest rate reduction in September because he couldn’t stand the pressure anymore or because he finally saw the necessity to do so, if the Fed pushes the rates lower, the crypto market is expected to go up.