Lots More on What Just Happened With the Fed at Jackson Hole

Summary

Odd Lots Podcast Summary

Episode: Lots More on What Just Happened With the Fed at Jackson Hole
Date: August 22, 2025
Hosts: Tracy Alloway, Dashiell Bennett
Guest: Mike McKee (Bloomberg TV)

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Overview

This episode of Odd Lots provides an in-depth discussion of the latest U.S. Federal Reserve meeting at Jackson Hole, focusing on Jay Powell’s final speech as Chair. The hosts and guest analyze the surprising policy direction signaled by Powell, changes in the Fed’s policy framework, the global central banking context, and implications for future monetary policy and leadership. The episode features insightful commentary on Fed communications, tariffs, and the broader significance of Jackson Hole within global finance circles.

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Key Discussion Points and Insights

1. The Surprise from Powell’s Speech

• Powell Opens the Door to Rate Cut: Contrary to most analysts’ expectations, Powell’s speech suggested openness to a rate cut, despite pending economic data that could still shift the outlook.

  “I was wrong. As were the majority of analysts who thought that Jay Powell would want to leave his options open for September... it was a bit of a surprise that he basically opened the door to a rate cut because now it’s really hard to close that door.”
  —Mike McKee [02:35]

• Changing Tone Among Fed Officials: Recent conversations with Fed members suggested a more hawkish stance had developed prior to the speech.

  “A lot of the people from the Fed that you’ve been talking to over the past couple of days, they sounded more hawkish than they did perhaps like just three or four weeks ago.”
  —Tracy Alloway [03:35]

2. The Fed’s Policy Framework: A Shift in Narrative

• From 2020 Framework to Pragmatism: The Fed’s 2020 framework was quickly abandoned as inflation surged.

  “They came up with this new framework in 2020 that didn’t work. And a year into it… Jay Powell said, ‘well, we’ve junked the framework because we’ve got inflation.’”
  —Mike McKee [05:29]

• Lesson Learned: The new policy approach is less reliant on fixed frameworks, recognizing the unpredictability of economic conditions.

  “We admit that we can’t steer the economy in quite as precise a way as we thought we could because the underlying conditions... can change faster than we anticipated.”
  —Mike McKee [06:34]

3. Jackson Hole’s True Character & Importance

• Atmosphere Inside the Conference: While media attention is intense, the event itself is mostly academic and not focused on actionable policy debate.

  “It’s rather quite boring unless you’re an academic economist... It’s not a meeting where people come in and go, okay, here’s unemployment and here’s prices and what do we do at the next meeting.”
  —Mike McKee [07:33]

• Why Jackson Hole Matters: The chair’s address has become the market’s August “reference point,” a tradition intensified since the 2008 financial crisis.

  “Then he announced basically that they were going to do QE for the first time at this meeting... And so that’s really focused a lot of attention on it, which then feeds on itself because it becomes important.”
  —Mike McKee [09:13]

4. Complexity and Communication of Fed Policy

• Evolving Complexity: Fed communications have become much longer and more complex since 2009, though recent efforts aim to simplify statements for clarity.

  “Starting from 2009, they exploded in both length and complexity… Then they became like 2,000 words. And you needed a college degree at a minimum to fully understand them.”
  —Tracy Alloway [10:18] “They’ve cut them back significantly… Now they’re just kind of saying, here’s one paragraph on where the economy is and a paragraph that says, here’s what we’re doing about it.”
  —Mike McKee [12:05]

5. Global Central Banking Context

• Different Regions, Different Pressures: All major central banks are grappling with the aftermath of the pandemic and, significantly, with U.S. fiscal and trade policies.

  “The Fed is always first among equals... But the biggest thing at the moment is that they’re all wrestling with Trump fiscal policy... the fiscal policy has different impacts on different countries.”
  —Mike McKee [13:01]

6. Tariffs and Inflation: One-Off or Persistent Risk?

• Ongoing Debate: There’s disagreement among economists about whether new U.S. tariffs will cause ongoing inflation or a single spike.

  “There has been division... The chairman seemed to decide it’s still going to be a one-time increase sector by sector… but it’s not going to be an ongoing process of each sector seeing prices rise.”
  —Mike McKee [14:04]

• Political Dynamics: Persistent political will for tariffs could make protectionism a lasting (and inflationary) feature.

  “Maybe the answer is that tariffs are a one off in terms of the inflationary impulse, but that the underlying political impulse... is going to be this new permanent feature...”
  —Dashiell Bennett [15:28]

7. Speculation on the Next Fed Chair

• Leadership Watch: With Powell exiting, the group speculates on who might be next, with Chris Waller’s odds seen as having improved after Powell’s speech.

  “You could argue that the speech today improved Waller’s chances if you were looking at it from a Las Vegas point of view in terms of odds.”
  —Mike McKee [16:21]

• Waller’s Character: Waller is described as an institutionalist unlikely to bend to political interference.

  “He’s somebody who follows what the Fed has done in the past. And I don’t think he would give in to the President’s desire to do something that would hurt the Fed...”
  —Mike McKee [17:36]

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Notable Quotes & Memorable Moments

• On Fed Policy Surprises:

  “It was a bit of a surprise that he basically opened the door to a rate cut because now it’s really hard to close that door.”
  —Mike McKee [02:35]

• On the Atmosphere at Jackson Hole:

  “Inside it’s an academic conference... almost never a headline inside because nobody says anything that would move markets or interest people really.”
  —Mike McKee [07:33]

• On Trade Policy Complexity:

  “Each one [tariff] affects another because so much of this stuff is intermediate goods that are used to price something else. So it gets very complicated.”
  —Mike McKee [14:04]

• On Potential New Fed Chair:

  “I don’t think Waller would go along with that... He’s an institutionalist.”
  —Mike McKee [17:36]

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Timestamps for Key Segments

• Powell’s Speech Analysis & Market Surprise – [02:35–04:45]
• Fed Framework: Evolution and Lessons – [05:20–06:34]
• Inside Jackson Hole: The Real Vibe – [07:29–09:13]
• Fed Communications: Complexity & Reform – [10:18–12:19]
• Global Central Banking Context – [12:19–13:39]
• Debate Over Tariffs and Inflation – [14:04–15:54]
• Speculation on Next Fed Chair – [16:21–17:36]

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Conclusion

This episode blends sharp policy insight with the hosts’ trademark humor, demystifying the annual Jackson Hole gathering and unpacking Powell’s surprising pivot toward rate cuts. With the uncertainty of global economics, shifting frameworks, and speculation about new leadership, the conversation highlights both the substance and spectacle of central bank policy at this pivotal event.

Transcript

[Lisa Mateo]

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[Dashiell Bennett]

Bloomberg Audio Studios Podcasts Radio News how.

[Tracy Alloway]

Many Jackson Holes have you actually been to now?

[Mike McKee]

It's a little hard to say, but my first one was 1997.

[Amy Morris]

Wow.

[Mike McKee]

I've missed a few here and there as breaking news has happened and I've had to be somewhere else, but so somewhere around 25 to 30.

[Tracy Alloway]

So Joe, if we keep doing this for another 40 years, we'll notch up as many Jackson holes as Mike has been to.

[Dashiell Bennett]

Maybe that if he does it another 40 years, we can never catch up.

[Tracy Alloway]

If Mike stops now and we keep doing it until we're 80, maybe catch.

[Dashiell Bennett]

Up. I did a dead list.

[Tracy Alloway]

I am both the most popular trader and most successful trader at Citadel.

[Dashiell Bennett]

Feta's going viral.

[Tracy Alloway]

Barges.

[Dashiell Bennett]

This is an After School special.

[Tracy Alloway]

Except I've decided I'm going to base my entire personality going forward on campaigning for a strategic pork reserve in the US Black Gold. These are the important questions. Is it robots taking over the world?

[Dashiell Bennett]

No. I think that like in a couple years the AI will do a really good job of making the Odd Lots podcast. One day that person will have the mandate of heaven.

[Tracy Alloway]

How do I get more popular and successful?

[Dashiell Bennett]

We do have the perfect guest. Welcome to Lots More where we catch up with friends about what's going on right now.

[Tracy Alloway]

Because even when Odd Lots is over, there's always lots more.

[Dashiell Bennett]

And we really do have the perfect guest. We are, of course, talking to the one and only Mike McKee of Bloomberg TV. A little surprising speech today, huh?

[Mike McKee]

Yeah, I was wrong. As were the majority of analysts who thought that Jay Powell would want to leave his options open for September. Because as we've been repeating over and over again, there's another jobs report, there's another CPI report before the next meeting. And so what happens if we see a reversion to the mean? We had a weak jobs report. What if the next one comes in strong? We had inflation going through CPI at a low level. Does that pick up a lot? In which case you don't want to cut rates. So it was a bit of a surprise that he said basically opened the door to a rate cut because now it's really hard to close that door.

[Dashiell Bennett]

Tracy, have you read Anna Wong's take yet?

[Tracy Alloway]

I have not.

[Dashiell Bennett]

So she has a new piece out on the terminal which you should read. But she argues that it's not so dovish if you used the 2024 speech as the benchmark, which is true for sure. That was a more dovish speech. But what I think the vibe is that maybe the three of us have. It's certainly dovish in the context of a lot of people suddenly like, let's look at the inflation side again.

[Tracy Alloway]

Well, this is exactly it. So, Mike, I think you had the same experience as us, which is a lot of the people from the Fed that you've been talking to over the past couple of days, they sounded more hawkish than they did perhaps like just three or four weeks ago.

[Dashiell Bennett]

Yeah.

[Mike McKee]

And I have to think that, or I have to caution myself to look at this as perhaps as a statistician would say a selection error because we happen to hit people who were more hawkish. Obviously the Chairman basically validated Chris Waller's forecast that they've decided that inflation is going to go up, but it's going to go up slowly. It'll take a while to get into the economy and sector by sector, it'll be a one time price rise and not a continuing price increase.

[Dashiell Bennett]

Setting aside the actual technical and economic details of the speech itself, were you surprised that there wasn't something more? I don't know if valedictory is the word, but you know, it's his last speech as the Chairman. It comes at a time when we all were all talking about the sort of threats to Federal Reserve independence. Were you surprised it was such a policy speech and not any sort of nods to some of these bigger things?

[Mike McKee]

I was not surprised by that. Powell is very self facing. He's not somebody who likes to toot his own horn and we kind of knew going in that he didn't want to make a big deal of this being his last Jackson Hole as chair. The Fed independence thing was a bit of a surprise because it has been such a big issue. But I think given the message he wanted to send to the markets about the policy going forward, plus he had the whole section on the new framework he had to discuss. Yeah, I think they felt it was just going to be too long, too much. And that would come up in many other fora to talk about.

[Tracy Alloway]

It is funny. No one's talking about the framework. The results of like five years of work on the framework are published today, and they're just lost in all.

[Mike McKee]

I have asked Fed officials about this. I said, why do you do this? Because they came up with this new framework in 2020 that didn't work. And a year into it, Jay Powell said, well, we've junked the framework because we've got inflation.

[Tracy Alloway]

And.

[Mike McKee]

And so if you're going to go to all this work to create a framework and then as soon as the economy turns, you junk it, kind of. What's the point? Their argument is that it gives them sort of a reference point of how they want to think about things. And today, really, they went back to 2012, which was, we'll do whatever the economy needs when it needs it.

[Dashiell Bennett]

It's important to remember. It's interesting thinking about that 2020 framework, because we are so the existence of that framework is so 2000 and tens. Right. It's so like thinking about, well, the main problem of monetary policy is long periods of undershoots. The zero bound, the zero bound constantly under 2%. How are we going to credibly get it above? And then five minutes later, we have the worst inflation in 40 years. That framework from 2020 was like. Is an artifact of a time.

[Mike McKee]

Yeah, absolutely. And the Fed's new framework sort of takes into account the fact that that could happen again because they're not using shortfall anymore in employment, and they've also dropped references to the zero lower bound. But basically they're saying, we admit that we can't steer the economy in quite as precise a way as we thought we could because the underlying conditions that we're working off of can change faster than we anticipated.

[Tracy Alloway]

I will just note, I know that Powell didn't speak about central bank independence directly, but there is at least one paper being presented at the conference that does deal with this issue by Emmy Nakamura from Berkeley, and we have a really good episode coming up with her. So there is some thematic discussion. It's just we're not all hearing it because it's closed doors. Although, Mike, you get to go inside the conference room.

[Mike McKee]

I get to go inside.

[Tracy Alloway]

All right, so what's the vibe like in the room?

[Mike McKee]

Well, I hate to disappoint everybody, but it's rather quite boring unless you're an academic economist, because these papers are written by academic economists and they're designed to look at longer term issues and try to put them in a context so that the central bankers can think about them. Okay, here's a problem that's come up. What's the research said about it in the past, that sort of thing. It's not a meeting where people come in and go, okay, here's unemployment and here's prices and what do we do at the next meeting that that doesn't get discussed at all. Even the Open Market Committee officials who are here, they're not going to be really talking about that because they talk about that all the time. They're here to fish and hike and enjoy the scenery along with these academic papers. So inside it's an academic conference. They present the papers, they have a discussant who talks about the papers and then people can ask questions. And if you notice, you know, if you're watching your Bloomberg terminal, there's almost never a headline inside because nobody says anything that would move markets or interest people really.

[Dashiell Bennett]

You know, other regional feds have their conferences. So you know, there's a Boston Fed one in November, there's an Atlanta Fed one, I think it's somewhere in Florida at some point in the year. The only thing that's really special here is that, and Powell alluded to it, it's Jackson Hole in August and anyone would be a fool to say no to coming there. And that's how they got Volcker to come because he liked fly fishing. Like this is why it exists theory. Like they could all show up at the other ones, but it's Jackson Hole in August, who's gonna say, and as you mentioned, people are here to fly fish. I think that's actually an important element, even though it's just a fun element, which is that it's late summer. It's kind of like halfway between vacation and work out here for almost everyone.

[Mike McKee]

Another reason that it has become important though is starting with Ben Bernanke. During the great financial crisis. He came and the chairman usually gave a speech to open the conference on the conference topic. And it was like, okay, we're talking about long term labor issues. That's a really good thing to talk about and we're glad you're all here kind of thing. Then he announced basically that they were going to do QE for the first time at this meeting. And Then the next year he also had announcement about qe, QT and what they were going to do. And then all of a sudden the focus became what's the Chairman going to say? Because if there's rarely a Fed meeting in August, just the way the calendar falls, maybe at the very beginning and then there isn't one till September. So you have this a long month where there's no reference point for the markets and that this became the reference point. So everybody pays attention to it. And as you know, it's a big build up to it. Oh, we've got Jackson Hole next week. What's the Chairman going to say? And so that's really focused a lot of attention on it, which then feeds on itself because it becomes important. So people want to be there because it is important.

[Tracy Alloway]

This reminds me, there was an old study, it was done a few years ago, so I would love to see a new study. But it basically looked at all the FOMC statements and speeches over time. And starting from 2009, they exploded in both length and complexity. So I think it used to be you could have a high school reading level and be fine reading some of the FOMC statements. They were very short, like 400 words and then they became like 2,000 words. And you needed a college degree at a minimum to fully understand them. Talk to us about just like the format of the speech because this is something else that people like to do is dissect the number of words and things like, like that. And it is true, this is a longer speech this year versus the relatively short speech from last year where Powell very definitively opened the door to a cut.

[Mike McKee]

Yeah, well I think that what made this speech long was talking about the framework. It's as we said, maybe somewhat irrelevant. But he had to go through it. They'd been doing this exercise and it was anticipated he would announce it here. So basically he went through it. We've now done the exercise and now we've explained it to you. And so you'll understand going forward if we refer to this. So that made it longer. The part that was really kind of to the point was the stuff about the economy. He outlined what they were thinking about the labor market and what they were thinking about inflation and then how those two knit together. If this had been an ordinary speech without the framework, it wouldn't have been as long as maybe it would have come across as even more punchy because it was just on that subject you were talking about the Fed statements getting very long, the post great financial crisis years. And the Fed realized that at one point.

[Tracy Alloway]

Oh yeah, that's right, two or three years ago.

[Mike McKee]

They've cut them back significantly. We used to have very long statements where they tried to explain every little thing and people found that too much. So now they're just kind of saying, here's we got one paragraph on where the economy is and a paragraph that says, here's what we're doing about it.

[Dashiell Bennett]

You know, another nice thing about Jackson Hole in late August is you don't just get, you know, just lure the Fed chair there, you lure central bankers all around the world. But I feel like in this moment, the Fed itself, the Fed is always first among equals. Most people would agree with that. But the Fed, because of all the dramas like this black hole sucking up all the energy is your perception. You know, we saw the walk where Powell was with Lagarde and Bailey and Ueda is your perception that all the developed market central banks are roughly wrestling with still the same things because there's been this global factor of the inflation and so forth. Are they all sort of basically feeling the same stresses they are?

[Mike McKee]

We're still living in a post pandemic world. So data are somewhat difficult to read. And you see the ups and downs of the economies that you may or may not be able to track. But the biggest thing at the moment is that they're all wrestling with Trump fiscal policy. But the fiscal policy has different impacts on different countries. For the United States, it's inflationary. For many of the countries out there, it's deflationary because their currency's going down, the dollar's getting stronger. And so they have different problems they have to deal with. They all have a problem with the consequences of the Trump policy, but the consequences are different for each one.

[Tracy Alloway]

Well, you were talking about this on TV earlier because when it comes to tariffs, there is still huge debate over how inflationary they might actually be. Because in traditional economics you would view them as a tax which tends to destroy demand and can lead to deflation. On the other hand, we have seen producer prices start to pick up. What have you learned about just how policymakers are actually viewing the impact of tariffs at this conference?

[Mike McKee]

Well, there has been division. We have the Chris Waller version who went to the textbook and said tariffs are a one time increase in the price level. And then since he first said that in July, what we've seen is the President delaying these tariffs so they come on one by one and that drags the process out. Now, what the chairman seemed to decide was that it's still going to be a one time increase sector by sector. So it might drag out, but it's not going to be an ongoing process of each sector seeing prices rise. So the impacts, they have a hard time judging because it's not like you pass Smoot Hawley and on a certain day it takes effect and you see the immediate price impact and then you can measure what's happening and what it's going to do. Here they have to take into account each sector, whether the exporter absorbs any of it, whether the importer absorbs any of it. What companies do in terms of pricing, do they take some out of their margins because they don't want to lose market share or do they just pass it along to people? These are all complex questions. And as one of the Fed economists said to me, each one affects another because so much of this stuff is intermediate goods that are used to price something else. So it gets very complicated. So it is hard for them to know exactly how this is going to play out.

[Dashiell Bennett]

Tracy, I have a take.

[Tracy Alloway]

Oh, oh, do you?

[Dashiell Bennett]

I have a take.

[Tracy Alloway]

What a surprise. All right, go ahead.

[Dashiell Bennett]

I was thinking about this when we were on air is maybe the answer is that tariffs are a one off in terms of the inflationary impulse, but that the underlying political impulse to impose tariffs, this desire for everyone to have all their stuff and protect their home countries, industries and so forth, is going to be this new permanent feature that is not a one off.

[Tracy Alloway]

Would that feature be inflationary?

[Dashiell Bennett]

And if that is sustained, then maybe it is, yeah.

[Tracy Alloway]

I mean, there is an irony here, which is the Trump administration has long criticized paperwork and government bureaucracy and things like that. And I cannot even imagine how much time companies are spending trying to figure out tariffs right now and doing customs documentation and stuff like that. Okay, Mike, next year we're going to have a new Fed chair. New vibes at Jackson Hole, potentially. Who are you watching out for right now?

[Mike McKee]

I'm still watching out for the original Trump list that Kevin's Hassett in warship and for Chris Waller. You could argue that the speech today improved Waller's chances if you were looking at it from a Las Vegas point of view in terms of odds. Because he was right.

[Tracy Alloway]

Right? Sort of.

[Mike McKee]

At least the Fed is saying he was right, but this is Donald Trump, so we have no idea. I think most of the people who've been sort of added on in the talking about stage in terms of the list are more red herrings. Some of them are obviously not going to be the chair. But what he's been able to do is get more people on TV getting interviewed about, are you going to be the chair? And they're all saying, well, we need to cut rates. You're not on the list if you're not going to cut rates. So are they really serious candidates? And Scott Besson says, okay, I got 11 people I'm going to bring in. The president keeps saying, I got three people I'm going to choose from. So I think you go back to the original list. He's comfortable with those people. They all look like they could be Fed chairs. And we know the impression that the person makes is important. So they're. They're the most likely ones to choose from. I'm not saying he couldn't. Surprise. He surprises in almost everything he does.

[Tracy Alloway]

Have you interacted with Waller before? I've never met him, so.

[Mike McKee]

Oh, I know Chris quite well. The one thing about Chris is we've extrapolated the Lisa Cook thing to if the President got four people on the board, then they can fire all the bank presidents, et cetera, et cetera. And he'd have all this control. I don't think Waller would go along with that. He's in favor of lower interest rates. He has his own ideas about the economy. But he's a very smart economist. And you could defend what he says, even if you don't necessarily agree with it. But he's an institutionalist. He's somebody who follows what the Fed has done in the past. And I don't think he would give in to the President's desire to do something that would hurt the Fed, hurt its credibility, hurt its ability to do its job.

[Dashiell Bennett]

Tracy, it's 2025. I think David Zervas looks like a Fed chair.

[Tracy Alloway]

Okay, I'm going to go fly fishing. I'm going to do what I'm supposed to do at Jackson Hole and go fish.

[Dashiell Bennett]

Let's go.

[Tracy Alloway]

Lots More is produced by Carmen Rodriguez and Dashiell Bennett with help from Moses Ondom and and Cale Brooks.

[Dashiell Bennett]

Our sound engineer is Blake Maples. Sage Bauman is the head of Bloomberg Podcasts.

[Tracy Alloway]

Please rate, review and subscribe to odd lots and lots more on your favorite podcast platforms.

[Dashiell Bennett]

And remember that Bloomberg subscribers can listen to all of our podcasts ad free by connecting through Apple Podcasts. Thanks for listening.

[Amy Morris]

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[Lisa Mateo]

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