Powell's Jackson Hole speech sends markets up 2% and pushes rate cut odds to 94%

Summary

Federal Reserve Chair Jerome Powell signaled openness to rate cuts at the Jackson Hole economic symposium on August 22, sending markets sharply higher. The Dow closed at a record for the first time this year, with the broader market gaining 2 percent. Odds of a rate cut in 2025 jumped from under 80 percent to 94 percent on Polymarket.

Powell's speech focused on labor market weakness rather than an explicit rate-cut announcement. He cited payroll growth that slowed to an average of 35,000 per month over the past three months, down from 168,000 per month during 2024. That deterioration was larger than previously assessed due to downward revisions to May and June figures. Powell invoked inflation 55 times during the speech, signaling the Fed views price pressures as manageable and economic growth as the priority if labor conditions weaken further.

Markets read the speech as confirmation that the Fed has rate cuts available if cracks widen in the labor market or economic growth stumbles. Current interest rates remain elevated, giving the Fed room to support the economy without needing to push rates into negative territory, a tool unavailable during the 2008 financial crisis. Equity markets are already at record highs with technical signals of overextension scattered throughout, yet the Fed has dry powder to cushion a correction if one materializes.

Chase Lochmiller, CEO of the startup Crusoe Energy, appeared to be at Jackson Hole the day before Powell's speech. That was an unusual venue for a founder, given the event typically hosts central bankers, academics, financial leaders, and journalists rather than startup executives. Bloomberg reported separately that Crusoe is raising at a $10 billion valuation, though the company has not announced the round.