Trumponomics in the hot seat at Jackson Hole

Powell's take on the economy incensed Trump, with the US presidential election campaign still underway. He accused Powell of siding with the Democrats and politicising Fed deliberations on rates, alleging that rate cuts were timed to benefit his rival candidate, Kamala Harris, then the vice president.

Read more: Jerome Powell: The man with the global economy in his hands

The Fed's rate-cutting cycle was gradual during the rest of 2024. But by the time Trump had returned to the White House, Powell became more guarded. Then Trump launched his wave of controversial policies, including the unprecedented series of tariffs announced on what he called "Liberation Day" on 2 April.

Powell resisted political pressure from the White House to cut rates. He kept the Fed's focus squarely on the indicators in the data and the central bank's formal assessment of the heightened economic risks of Trump's second term.

With the 47th president's return to office in full swing, the relationship between Trump and Powell adds to the global attention on this year's Jackson Hole.

Its official theme has a more prosaic title—"Labour Markets in Transition: Demographics, Productivity and Macroeconomic Policy." Delegates will examine shifts in productivity and labour dynamics, and consider how monetary policy should adapt, particularly with respect to two areas always vital to central bankers: inflation and interest rates.

It is an agenda likely to open the way for conclusions Trump will not like. They may amount to a strong professional rebuttal to Trump's charges against Powell, and his mounting pressure for rate cuts and on the Fed's mandate, its powers, and independence from day-to-day political control.

Trumponomics on trial

Part of the Jackson Hole deliberations will consider Trump's economic policies and the deep scars on the labour market, from slower job creation to higher unemployment. Figures from August 2025 show nearly two million US citizens receiving unemployment benefits, the highest level since November 2021. In July, the US unemployment rate rose to 4.2%, with the economy adding only 73,000 private-sector jobs, well below forecasts. Meanwhile, government payrolls shed about 12% of the overall federal workforce.

Economists attribute these numbers to Trump's policies: the new tariffs, federal spending cuts, and tighter immigration rules, all of which fuel uncertainty and slow hiring.

Added to this are erratic trade policies and fluctuating negotiations, alongside the rising cost of imports, which hit labour-intensive sectors such as retail, construction, and manufacturing particularly hard.

Taken together, these factors provide Powell with ample justification for a fresh rate cut. It would be easy to justify any such move with fundamental economic factors, to keep distances from Trump's political meddling and his attempts to bend Fed policy for the benefit of his administration. Weak job growth typically eases wage pressures and dampens consumption, both of which help curb inflation.

Though the debate may seem strictly about the US, it's worth stressing that Fed decisions steer global economic trends and bank rates everywhere, particularly in dollar-tied economies, with Gulf markets at the forefront.

What to expect?

In his eagerly awaited speech, Powell may avoid directly signalling the timing of the next cut. Instead, he's likely to focus on managing expectations, underlining prevailing uncertainties, and emphasising that decisions will remain guided by economic data rather than Trump's political diktats.

All signs point to another round of confrontation between the two men in the coming week. The question is: Will Powell once again stand firm over Trump and demonstrate his determination to safeguard the independence of central bankers?