Federal Reserve Chair Jerome Powell hinted at a September interest rate cut in his final address at the Jackson Hole economic symposium, despite mounting job-market risks and lingering inflation worries.
The market expects a rate cut ahead of Powell’s speech, with 80% probability assigned to a quarter-point interest rate cut in September. This has led to a drop in bond yields, with two-year U.S. Treasury yields falling by about 10 basis points to 3.69%. Benchmark 10-year yields were down nearly eight basis points to 4.26%.
However, some experts warn that the market may be over-optimistic, citing concerns over stagflation and a slowing economy. “People have been increasingly worried that we’re kind of heading into a stagflationary story,” said Drew Matus, chief market strategist at Metlife Investment Management.
Others believe that Powell’s dovish message provides comfort to markets, which have been expecting looser policy ahead. “The fact that we are still looking for easing ahead provides some comfort that at least the elevated equity valuations and expectations are supported by the fact that we’re looking at looser policy,” said Angelo Kourkafas, senior investment strategist at Edward Jones.
The speech has also sparked concerns over the independence of the Federal Reserve, with worries about a slowing economy and reduced demand for the dollar. The dollar index was last down 1%.
Overall, Powell’s address suggests that the market is cautiously optimistic about a rate cut ahead, but experts caution that there are still risks to consider.
Source: https://www.reuters.com/business/finance/powell-fires-up-markets-some-investors-see-reason-caution-2025-08-22