Last speech from Powell to Fed? Jackson Hole under tension

This Friday, the president of the federal reserve could give his last big speech, in a tense economic context and under unprecedented political pressure. Wall Street, the White House and all markets await clear signals. Orientation of rates, posture in the face of inflation, independence of the Fed: each word will count, and could weigh heavy.

Fed in the heart of the political storm

Approaching his speech to Jackson Hole, Jerome Powell faces intense political pressure, carried out without detour by the Trump administration. These tensions have crossed a new threshold in recent weeks, illustrating an increasingly degraded institutional climate between the White House and the Federal Reserve.

Here are the significant facts of this escalation:

• Donald Trump continues to require an immediate drop in rates, resuming a rhetoric already observed during his first mandate. The presidential pressure is constant, including on points being more of internal management than monetary policy.

• The renovation project of the Fed headquarters in Washington has become a pretext for attack: the White House accused the Central Bank of Malt Management of public resources, an unusual criticism at this level of institution.

• Lisa Cook, Fed governor, was personally targeted by accusations of mortgage fraud on two loans guaranteed by the State, an attack interpreted by numerous analysts as an attempt at internal destabilization.

• Trump has planned to dismiss Jerome Powell, a scenario already mentioned in the past, but which has so far been excluded for legal reasons. “It seems quite clear that Trump cannot legally send him back. He can obviously exert enormous pressure on him ”,, underlines Dan North, economist at Allianz Trade North America.

Faced with these repeated assaults, Powell could take advantage of his gallery at Jackson Hole to assert the need to preserve the independence of the Central Bank.

His usual approach, described by Michael ARONE (State Street Global Advisors) as “Focusing on data, ignoring outside noise”has so far allowed the Fed to keep its course without entering an open conflict. However, at this stage, any public defense of monetary independence will be scrutinized by observers and markets.

Towards a strategic turning point in monetary policy?

Beyond the political tumult, which will especially draw attention this Friday is the orientations of monetary policy that Powell could reveal in his speech entitled “Economic Outlook and Framework Review”.

The markets anticipate a drop in guiding rates from the September meeting, even if Powell should not be openly engaged on this ground. “We do not expect him to announce a decisive drop, but the speech should clearly show that it is in favor of such a movement”notes David Mericle, economist at Goldman Sachs.

However, several influential members of the Monetary Policy Committee (FOMC), including Jeffrey Schmid, President of the Fed of Kansas City, or Raphael Bostic (Atlanta), expressed their skepticism on the urgency of such relaxation. The flexibility of the job market, although real, is qualified as ” solid “ By several Fed officials, which could push Powell to delay.

Another strategic point of discourse could be a partial revision of the inflation framework adopted in 2020, during the COVID crisis. At the time, the Fed had opted for a so -called policy of “Average inflation targeting”allowing to temporarily tolerate inflation above 2 % if it favored employment, especially for under-represented groups.

This choice has since been criticized, some believing that it has contributed to the inflationary runaway of 2021-2022. According to Matthew Luzzetti, chief economist at Deutsche Bank, Powell could announce a return to a more classic and preventive approach: “We expect the discourse to call for a partial return on the 2020 modifications and restore a central role in pre -emption in the face of inflation”.

In this context, cryptos, and in particular bitcoin, are found in a position of referees. Often perceived as a coverage against monetary drifts or the instability of central banks, Bitcoin could take advantage of a weakening of the dollar or a too late reversal of the Fed. The growing attention of institutional investors to cryptos reinforces this dynamic, because each inflection of Powell's discourse can now resonate to the orders of decentralized platforms.

Jerome Powell's speech to Jackson Hole promises to be a turning point on several levels. If he manages to recall with firmness the independence of the Fed without giving in to political attacks, while sketching a credible evolution of monetary policy, he could strengthen the credibility of the institution at a critical moment. However, the room for maneuver is close, and contradictory expectations. For Crypto investors, the outcome of this discourse will not only determine the evolution of rates such as the Goldman Sachs anticipated, but may well announce a change in monetary paradigm which will have to be anticipated in the coming months.