UBS said Federal Reserve Chair Jerome Powell’s Jackson Hole speech was “classic Powell” — signalling a higher probability of a September rate cut to offset the drag from trade tariffs, but offering little in the way of a medium-term framework for an economy facing structural upheaval. Markets welcomed the rate-cut hints, but the bank argued the message was essentially a “data-dependent mantra padded with rhetoric.”

UBS flagged the absence of a stronger defence of the Fed’s independence, noting that Trump’s threat to fire Governor Lisa Cook underscored political risks to the institution.

UBS argue that a Trump politicised Fed could:

• revive inflation uncertainty
• potentially adding a full percentage point to real borrowing costs
• with knock-on effects for fiscal policy, corporate investment, housing affordability, household savings and speculative activity