Powell Keeps September in Play, Balancing Jobs Anxiety Against Sticky Inflation

 

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Wall Street found a foothold after the open as Jerome Powell’s Jackson Hole speech sketched a careful case for relief without promising it. The Fed chair said policy remains restrictive and acknowledged that the labor market has cooled enough to raise the risk of tightening for too long. At the same time, he cautioned that inflation progress isn’t complete and that some categories are still feeling tariff-linked cost pressure. The message: a rate cut as soon as next month is possible, but the central bank will let the data set the pace.
Stocks welcomed the nuance. The major indexes pushed higher within the first half hour, with the day’s early gains signaling that investors see the probability of an initial cut rising—even if it isn’t a lock. The strongest advances clustered in sectors that tend to benefit when yields edge lower and growth remains intact, a pattern consistent with a “soft-landing with insurance” narrative rather than a recession call.
Powell’s framing offered a blueprint for how the Committee might proceed. If jobs data continue to cool and inflation steadies closer to target, a quarter-point move in September would be justified as an insurance policy against an unnecessary slowdown. If upcoming reports surprise on the hot side, the Fed’s credibility on inflation takes precedence and the first cut can wait. That is the essence of data dependence: preserve flexibility, react to evidence, and avoid boxing the Committee into a path that incoming information might not support.
For markets, the distinction between a risk-management cut and a victory-lap cut is crucial. The former aims to balance growth and price stability as the economy downshifts; the latter celebrates a completed journey back to target. Powell clearly signaled the former. That tends to pull real yields down modestly, support longer-duration equities, and keep the dollar’s direction tied to how quickly the rest of the world converges toward easier policy. Credit spreads typically tighten on the combination of easier financial conditions and still-decent growth.
The day’s debate also turned on how to interpret the summer’s business surveys, which show firmer activity and a re-awakening of pricing power in services. Those cross-currents explain why Powell avoided an outright pre-commitment: with the economy still expanding and inflation not quite home, the Fed wants room to respond to surprises in either direction. Upcoming releases on spending, prices, and employment will provide the tiebreaker.
Bottom line, Powell didn’t promise a September cut—but he didn’t take it off the table either. For investors, that was enough to keep the soft-landing trade in play and give risk assets a lift after the bell. The burden of proof now shifts to the data tape that will arrive before the next meeting.