Markets are increasingly convinced the Federal Reserve will trim its benchmark rate next month, assigning an 83% chance to a 25-basis-point cut, even as Chair Jerome Powell prepares to address the central bank’s annual Jackson Hole gathering on Friday. Private gauges put current U.S. inflation at 2.02%, close to the Fed’s 2% goal, and strategists such as ING’s Chris Turner forecast as many as three reductions this year. The policy outlook has become entangled with intensifying political pressure. President Donald Trump has repeatedly demanded that borrowing costs fall by at least three percentage points, arguing cheaper money would save the government roughly $1 trillion a year. A Reuters analysis warns that such demands risk ushering in ‘fiscal dominance’—a scenario in which managing federal debt crowds out the Fed’s inflation-fighting mandate and undermines its independence. Within the administration, Treasury Secretary Scott Bessent has echoed the call for lower rates, saying easier policy could revive home construction and help cap housing costs for the next one to two years. Some analysts counter that rate cuts would do little to address the sector’s structural supply shortages and might even rekindle price pressures. Powell must balance these conflicting forces as he delivers what is likely to be his final Jackson Hole speech before his term ends in May 2026. Investors will scrutinise whether he signals that a September move is a one-off adjustment or the start of a renewed easing cycle. Any hint of resistance to political interference will also be watched closely, with the Fed’s credibility increasingly seen as pivotal to containing both inflation and long-term Treasury yields.