Fed -Chairman Jerome Powell’s speech Friday at this year’s Jackson Hole Economic Policy Symposium balanced rising inflation risk towards a fragile labor market, and the political calendar is now raising the odds that his possible successor will be less cautious at the rates.
Powell’s message was deliberately sober.
He said that “the effects of tariff rates on consumer prices are now clearly visible” and will continue to filter through with uncertain timing. Heading PCE inflation ran 2.6% in July and core 2.9%, with goods prices flipping from last year’s fall to winnings.
He framed the labor market as a “curious form of balance” with pay growth, which slowed down to approx. 35,000 a month in recent months from 168,000 in 2024, while unemployment is 4.2%.
Immigration has cooled, the growth of the workforce is softened, and the breakven pace with hiring needed to keep unemployment stable is lower, which masks fragility. Net-net, he said that almost sift risks are “tilted to the head” of inflation and “to the disadvantage” of employment, a mixture arguing for care rather than a rapid easing cycle.
He also resets the frame.
Fed fell 2020’s “average inflation target direction,” returned to flexible 2% targeting and clarified that employment can run over estimated maximum levels without automatically forcing hiking, but not at the expense of price stability.
He emphasized, “We will not let a one -off increase in the price level become a continuous inflation problem.” The policy is “not on a preset course” and while September is live, the bar looks high for a quick series of cuts, unless the data is more weakened.
This macro attitude lands within a new political background that markets cannot ignore. Powell’s current period ends May 15, 2026, and he has said he intends to serve it. Donald Trump has attacked Powell and calls for lower rates, but legal protection means that a president cannot remove a bold governor or chairman of political discrepancies.
Trump can announce his preferred compensation for Powell well before 2026, giving markets time for price in a chair that is likely to be more Dovish and tolerant of growth risk than Powell. The threatening shift matters how the path to the rates develops into 2026, even though the next few FOMC meetings remain data -dependent.
Political excitement reappeared on Friday when Trump publicly threatened to shoot the bold governor Lisa Cook over alleged mortgage fraud if she did not resign. Like Powell, governors have strong protection and can only be removed for cause. Markets read this less as an immediate threat of governance and more as a sign that the staff pressure of Fed could grow, increasing the uncertainty of future leadership and communication.
What this means to us treasurys
The speech points to a slower, lower easing path in the fourth quarter of 2025, unless inflation withdraws convincingly. Tariff Pass-Through keeps the prices of goods sticking, while services only facilitated gradually, arguing for front-end yields that remain firm and the curve that is only stepped if growth data is weakened.
A future, less cautious chair could compress term prizes later by signaling a faster path to neutral, but between now and then rate volatility remains high, and rallies are the data on the point rather than politically led.
What this means to us shares
A careful bold supports the soft -slot tale, but not a quick multiple expansion. Earnings growth can carry benchmarks, yet rate-sensitive growth stocks remain vulnerable to upward surprises in inflation or wages pushing cuts further out.
If the markets begin to price a chair that is more willing to ease into a hot inflation background, cyclic and small caps can capture a bid, but the risk of credibility increases if inflation’s expectations drift. Currently, stocks are the space between each inflation sprint, payroll update and fed communication.
What this means for crypto
Crypto lives in the intersection of liquidity and inflation history. A higher-for longer attitude edge speculative streams into altcoins and crypto-related shares such as miners, exchanges and state treasury companies because financing costs remain increased and risk evaluation tight.
At the same time, sustained inflation over Target keeps the hard activating narrative alive and supports the demand for assets with scarcity or settlement finality. This combination favors Bitcoin and big capital, cash-supported tokens over long-lasting, storytelling-heavy projects until bold signalizes more beliefs about cuts.
If a successor chair in 2026 is perceived as less cautious, the liquidity cycle may become more crucial to Crypto’s benefit, but the price of getting there is more volatility such as trade dealers’ management, Senate’s confirmation and the data.
Why the path means more than the first cut
Even if bold trimming the rates in September, as it seems very likely, Powell’s framing implies a slide path that is pace by inflation expectations, not the hope of the market. Housing transfer is muted by mortgage lock, so small cuts may not lock away growth quickly.
Global relief elsewhere adds a marginal liquidity with scatter, yet the dollars path and expression prizes will be related to whether American inflation behaves like a disposable star chef or a sticky process. In the earlier case, crypto width can be improved and the risk can rotate beyond Bellwethers; In the latter, leadership remains narrow, and rallies fade on hot data.
2026 Wildcard
Markets must now price a two-step regime: Powell’s cautious data-driven attitude through 2025, then the possibility of a chair chosen by Trump less patient with inflation over targets if growth is weakened, or more willing to accept inflation risk to support activity. Agreement restrictions and confirmation of the Senate are real, so a wholesale wholesale is not automatic, but the distribution of the results is expanded.
For Treasurys, which can mean fatter expressions of expression until leadership is known; For stocks, it can mean rotation and factor -churn; For crypto, it can mean a stronger medium -term liquidity story paired with chopping in the short term.
The bottom line
Powell asked for time and data as tariffs lift prices and the job engine down. Markets now have to trade this caution through the fourth quarter of 2025, while also discounting the realistic chance of a less cautious bold chairman in 2026.
The fact that two-stage makes the next year a test of patience in Treasurys, a grinding in stocks and a volatility trade in crypto-with-with-payment, which is determined by whether inflation turns out to be transient enough for this fat to cut, or sustained enough, as the next one chooses to.
