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The Fed: Powell to get last word on interest rates after next Friday’s job report

Fed Chairman Jerome Powell will speak about the economy on Friday Sept. 6, shortly after the key August job report is released, the U.S. central bank announced Thursday. Read More...

Fed Chairman Jerome Powell faces a harder task to look independent after a former Fed official suggested the central bank look at politics in setting interest rates.

Federal Reserve Chairman Jerome Powell is perhaps going to get the last word before the central bank goes silent ahead of its Sept. 17-18 policy meeting.

Powell is scheduled to speak in Switzerland, at the University of Zurich, about the U.S. economic outlook and interest-rate policy next Friday, Sept. 6. Powell will speak at 12:30 p.m. Eastern.

That’s only a few hours after the government releases the key August employment report. And it is a few more hours before the Fed goes silent to prepare for its policy meeting.

The bond market is convinced that the Fed is going to cut interest rates two more times this year and maybe once more at the beginning of 2020. In June, the Fed penciled in two more cuts.

The Fed voted 8-2 at the end of July to cut its benchmark federal funds rate by a quarter-point to a range of 2%-2.25%. Powell called the rate cut a “mid-course correction.”

A large minority of Fed officials don’t think this is the time for the Fed to aggressively cut interest rates. They want the Fed to refrain from action in September and take a “wait-and-see stance.”

Another faction thinks that the Fed has to ease in the face of a weaker global picture.

Not easing would push up the dollar and be tantamount to a rate hike, said Michael Gapen, chief U.S. economist at Barclays.

In his speech in Jackson Hole, Wyoming, last week, Powell was “skillfully non-committal” about whether the Fed would cut rates in September, according to Jeremy Siegel, a professor of finance at the Wharton School of the University of Pennsylvania.

Read: Powell says Fed ‘carefully watching developments’ and ‘will act as appropriate’

Powell may also use the speech to address former New York Fed President William Dudley’s essay this week that suggested the Fed might want to take steps to consider the economic risks of President Donald Trump’s re-election when setting interest rates.

The Fed quickly put out a statement distancing itself from Dudley’s comments, but the controversy has not subsided.

See: Fed should refuse to ‘play along’ with Trump’s trade war, Dudley says

Trump as castigated the Fed for not cutting interest rates and lowering the value of the dollar relative to U.S. trading partners. Shortly after Powell spoke in Jackson Hole, Trump startled investors by calling Powell an “enemy” on par with China’s President Xi Jinping.

Analysts will be watching the August job report closely for the latest reading on the strength of the labor market.

Consumer spending is keeping the economy growing, albeit at a bit slower pace this year. Businesses have stopped spending but have not stopped hiring. If that changes, it would put pressure on households and increase the risk of a recession.

Stocks have been volatile since the last Fed meeting in late July. But the S&P 500 Index SPX, +1.27%  is still up 417 points, or 16.7%, year-to-date.

The 10-year Treasury yield TMUBMUSD10Y, -0.06%  hit a 52-week low of 1.469% on Wednesday.

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