Understanding the Fed’s Jackson Hole Symposium: 3 Reasons to Care

This year, the Jackson Hole conference in Wyoming is more than just a chance to see central bankers outside their natural habitat.

The annual economics symposium, which begins Thursday, brings together top monetary policy officials from around the world. This year, the central bankers discuss economic policies and research centered on the theme “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy.”

While that may sound dull, the conversations could affect your wallet. This year, there are at least three reasons the conference is worth paying attention to:

Interest Rate Outlook

Federal Reserve Chair Jerome Powell is scheduled to give a speech, during which he could provide some insight into whether the Fed is poised to lower borrowing costs in September. The Fed is currently caught in a dilemma about whether to lower the federal funds rate, driving down borrowing costs on all kinds of loans.

Fed officials have held the fed funds rate at a range of 4.25% to 4.5% all year. They have kept it higher than usual in an effort to stifle the post-pandemic surge of high inflation, which is still running well above the Fed’s goal of a 2% annual rate. Fed officials have also voiced concerns that President Donald Trump’s tariffs could push up consumer prices even more and fuel an inflation comeback.

But more recently, tariffs and an immigration crackdown have slowed the economy, grinding down job growth and threatening to increase unemployment. Two members of the 12-person committee that votes on monetary policy have already called for lower rates, and financial markets are betting a rate cut is coming.

Powell may use his speech to signal his position on the issue. If he casts doubt on rate cuts, he could shake up expectations and shock financial markets.

The Federal Reserve’s Decision-Making Framework

Powell’s speech is also set to cover the Fed’s ongoing policy framework review, which could have longer-term implications for monetary policy. The framework is a set of strategies that guide the Fed’s decisions on interest rates. Economists expect Powell to discuss whether the Fed is reconsidering its approach to targeting inflation.

Currently, the Fed’s strategy is to use monetary policy to keep inflation at an average rate of 2% a year over time. Controversially, in 2020, the Fed adopted a flexible average inflation targeting strategy, meaning that if inflation ran under 2% for a period of time, it would tolerate higher-than-2% inflation for a while.

The policy was put to the test almost immediately when the pandemic hit. A surge of inflation in the pandemic’s aftermath roiled an economy that had gotten used to over a decade of low inflation. That led some experts to question whether the Fed’s new policy had been a little too flexible. It delayed the central bankers’ cranking up interest rates to fight inflation and contributed to price increases getting out of hand in 2022.

Fed-watchers, including Deutsche Bank economists, expect Powell to say the central bank is changing its flexible approach.

“While the adoption of the new framework in 2020 was not the primary factor behind the Fed’s delay and the substantial inflation overshoot, it contributed to this outcome,” Matthew Luzzetti, chief economist at Deutsche Bank, wrote in a commentary. “For this reason, we expect Powell’s speech in Jackson Hole to highlight changes to the Fed’s statement on longer-run goals that will reflect this reality.”

The Fed’s Independence

The high-profile conference is also a chance for Powell and other officials to assert the central bank’s independence from direct control of the White House. As it’s currently set up, the president does not control interest rates and has only limited authority to change the makeup of the committee in charge of them.

In recent months, President Donald Trump has challenged that status quo, demanding that the Fed lower interest rates and threatening to fire Powell. He has even threatened to take legal action against Powell and other fed officials, turning up the pressure on policymakers to either follow his lead or quit.

Economists said the Fed’s traditional independence from political influence is one reason for the relative stability of the U.S. economy. Countries where the central bank is more under the direct control of the president typically submit to pressure to lower interest rates, and according to several studies, they have higher rates of inflation and poor economic performance.