What’s the Fed’s next move?

Federal Reserve Chair Jerome Powell looks on at the Jackson Lake Lodge in Jackson Hole
Federal Reserve Chair Jerome Powell looks on at the Jackson Lake Lodge in Jackson Hole
Reuters
Tomorrow morning, the man with the power to move markets will be center stage. It’s that time again – for Federal Reserve Chair Jerome Powell to address the Fed’s annual conference in Jackson Hole, Wyo. Last year, his words warned of looming interest rate hikes, and the Dow Jones Industrial Average plummeted 1,000 points. So is it time to buckle up?

It’s a tricky moment for the global economy. Growth is slowing around the world – particularly in China. The regional US banking crisis earlier this year sowed fears that further rate hikes could destabilize the industry. And inflationary pressures around the world – especially for food – are sending prices north, thanks to climate change and the war in Ukraine.

Powell is expected to strike a more optimistic tone this year – but not a triumphant one. After a year of 11 rate hikes (interest rates are at their highest levels in 22 years), the Fed has made significant progress in easing annual inflation, reducing it from 8.5% this time last year to today’s 3.2%. But it’s still higher than the Fed’s 2% target – and there are fears that high consumer spending will keep translating into higher prices. But there is also murmuring of the Fed pulling off a “soft landing,” where it manages to tame inflation without tanking the economy.

Consumers are burning through the last of their COVID savings, so the consumer spending problem could solve itself. Monetary policy takes time to ripple through the economy, but Powell needs to decide how patient the Fed can afford to be.

Rob Kahn, director of Eurasia Group’s Geoeconomics practice, expects the Fed to pause their rate hike cycle in September. But today Powell is likely to leave the door open for additional rate hikes and signal a willingness to maintain the Fed's tight monetary policy well into 2024.

But come November, Kahn anticipates one more 25-basis-point hike and says that the first cuts are only likely to come in mid-2024 as the Fed continues aiming for the holy grail of 2%.

More from GZERO Media

Paige Fusco

Justin Trudeau is leaving you, Donald Trump is coming for you. The timing couldn’t be worse. The threat couldn’t be bigger. The solutions couldn’t be more elusive, writes GZERO Publisher Evan Solomon.

- YouTube

Is international order on the precipice of collapse? 2025 is poised to be a turbulent year for the geopolitical landscape. From Canada and South Korea to Japan and Germany, the world faces a “deepening and rare absence of global leadership with more chaos than any time since the 1930s,” says Eurasia Group chairman Cliff Kupchan during a GZERO livestream to discuss the 2025 Top Risks report.

During the Munich Security Conference 2025, the BMW Foundation will again host the BMW Foundation Herbert Quandt Pavilion. From February 13th to 15th, we will organize panels, keynotes, and discussions focusing on achieving energy security and economic prosperity through innovation, policy, and global cooperation. The BMW Foundation emphasizes the importance of science-based approaches and believes that the energy transition can serve as a catalyst for economic opportunity, sustainability, and democratic resilience. Our aim is to facilitate solution-oriented dialogues between business, policy, science, and civil society to enhance Europe’s competitiveness in the energy and technology sectors, build a strong economy, and support a future-proof society. Read more about the BMW Foundation and our Pavilion at the Munich Security Conference here.

U.S. President Donald Trump and Israel's Prime Minister Benjamin Netanyahu shake hands after speaking to reporters before their meeting at the King David Hotel in Jerusalem on May 22, 2017.

REUTERS/Jonathan Ernst

President-elect Donald Trump raised eyebrows this week by sharing a video clip on his Truth Social account that shows economist Jeffrey Sachs trashing Israel’s Prime Minister Benjamin Netanyahu.

The European Union flag is displayed on a laptop screen and Elon Musk's account on X is displayed on a phone screen.

Jakub Porzycki/NurPhoto via Reuters

Donald Trump’s bestie, Elon Musk, looks to be headed for a showdown with the elected leaders of Europe, and it is not clear who will come out on top.

Firefighters battle the Palisades Fire as it burns during a windstorm on the west side of Los Angeles, California, on Jan. 8, 2025.
REUTERS/Ringo Chiu

Out-of-control wildfires are devastating southern California, which, in the hyperpolarized political world of 2025, has resulted in a war of words between Republicans and Democrats.