The speech of the president of the Fed, Jerome Powell, Friday during the symposium on the economic policy of Jackson Hole of this year, balanced the increase in the risk of inflation against a fragile labor market, and the political calendar now raises the chances that its possible successor is less cautious about the rates.
Powell’s message was deliberately sober.
He said that the “effects of consumer prices prices are now clearly visible” and will continue to filter with an uncertain timing. The inflation of the PCE -in -chief cost 2.6% in July and 2.9%, the prices of goods, going compared to last year’s decreases to gains.
It has developed the labor market as a “curious type of balance”, the growth of payroll slowing around 35,000 per month in recent months, against 168,000 in 2024, while unemployment is 4.2%.
Immigration has cooled, the growth of the workforce has softened and the pace of the passage to hiring necessary to maintain stable unemployment is lower, which masks fragility. Net-Net, he said that short-term risks are “increasing upwards” for inflation and “downward” for employment, a mixture that pleads for care rather than a rapid softening cycle.
He also reset the frame.
The Fed abandoned the “targeting average inflation” of the 2020s, returned to a flexible targeting of 2% and said that employment can exceed the maximum estimated levels without automatically forcing increases, but not at the expense of price stability.
He stressed: “We will not allow a punctual increase in the price level to become a problem of current inflation.” Politics is “not on a predefined course” and while September is live, the bar for a quick series of cuts seems high unless the data weaken more.
This macro-position landed in a new political backdrop that markets cannot ignore. Powell’s current mandate ends on May 15, 2026 and he said that he intended to serve him. Donald Trump attacked Powell and calls for lower prices, but legal protections mean that a president cannot withdraw a governor or president of the Fed for political disagreements.
Trump can announce his favorite replacement for Powell long before 2026, which gives the price markets in a chair that is likely to be more dominant and tolerant at the risk of growth than Powell. This imminent change is important on the way in which the rates path evolves around 2026, even if the next FOMC meetings remain dependent on the data.
Political tensions on Friday when Trump publicly threatened to dismiss the governor of the Fed, Lisa Cook, for an alleged mortgage fraud if she does not resign. Like Powell, governors have solid protections and can only be deleted for good reason. The markets read this less as a threat of immediate governance and more as a sign that the pressure of the personnel on the Fed could increase, increasing uncertainty around leadership and future communication.
What it means for us Treasurys
The discourse indicates a slower and less deep softening path in the fourth quarter of 2025, unless inflation is convincingly withdrawn. The price passing it maintains the prices of sticky goods while the services are only relaxing gradually, which pleads for frontal yields by remaining firm and the curve breaks only if the growth data weaken.
A future and less prudent chair could compress bonuses later by signaling a faster path to neutral, but by this time, the volatility of the rates remains high and the gatherings are led by data rather than directed by politics.
What it means for American actions
A prudent Fed supports the mild landing story, but not a rapid multiple expansion. Profits growth can transport benchmarks, but growth actions sensitive to rates remain vulnerable to surprises upwards or wages that push further.
If the markets are starting to assess a chair which is more willing to alleviate a backdrop of hot inflation, cyclics and small caps could take an offer, but the risk of credibility increases if inflation provides. For the moment, the actions are negotiating gaps between each inflation print, update of the payroll and nourished communication.
What it means for crypto
The crypto lives at the intersection of liquidity and the history of inflation. A higher position at a longer limit of speculative flows in altcoins and actions related to crypto such as minors, exchanges and businesses responsible for cash, because funding costs remain high and tight risk budgets.
At the same time, the inflation supported above the target maintains the story of hard life assets and supports the demand for assets with rarity or purpose of settlement. This combination promotes bitcoin and tokens supported by cash flows on long -term and heavy projects of the narration until the Fed signals more conviction on the cuts.
If a successor president in 2026 is perceived as less cautious, the liquidity cycle could turn more decisively in favor of cryptography, but the price to get there is more volatility as disabled traders, the confirmation of the Senate and the data.
Why the path counts more than the first cut
Even if Fed’s prices in September, as now seems very likely, Powell framing implies a GlidePath path by expectations of inflation, not on the hope of the market. The transmission of the accommodation is reduced by mortgage locking, so that small cuts may not quickly unlock growth.
The global softening elsewhere adds a rear marginal liquidity wind, but the dollar path and the term premiums will spend if American inflation behaves as a single price shock or a more sticky process. In the first case, crypto width can improve and risk can turn beyond the bells; In the latter, leadership remains narrow and the rallies fade on hot data.
The Joker 2026
The markets must now assess a two -step regime: Powell’s prudent position, focused on data until 2025, then the possibility of a chair chosen by Trump which is less patient with higher inflation if growth is weakening, or more willing to accept the risk of inflation to support activity. The nomination constraints and confirmation of the Senate are real, so a large pivot is not automatic, but the distribution of the results widens.
For treasures that can mean larger term premiums until leadership is known; For actions, this can mean the rotation and the unsubscribe of the factors; For crypto, this can mean a stronger medium -term liquidity history associated with more trying short -term trading.
End
Powell has requested time and data because prices increase the prices and engine of retrograde jobs. The markets must now negotiate this prudence in the fourth quarter of 2025 while reducing the realistic chances of a less prudent Fed president in 2026.
This step made the following year a patience test in the treasure, a version of actions and a volatility trade in crypto – with the gain determined by the question of whether inflation turns out to be transient enough for this Fed to be able to cut, or sufficiently persistent for the next one to choose.
