Federal Reserve Chairman Jerome Powell is set to speak at the annual central bank symposium this week amid growing bets that a rate cut is nearly guaranteed next month. But Powell may defy expectations, refusing to cave as the final battle against inflation looms large, Scotiabank (TSX:BNS) Economics warned in a recent note.

"The Fed has not won the last inflation battle given recent PPI and CPI readings and the requirement to have much more data given factors like residual seasonality and sampling deficiencies," Scotiabank said.

The annual Jackson Hole gathering kicks off with informal interviews ahead of the formal agenda release Thursday evening. Powell's key address on Friday morning will focus on the economic outlook and the promised framework review, but is unlikely to directly address near-term rate moves.

Still, markets are likely to listen closely for any hint of an easing bias, but Scotiabank expects only vague references if any, such as "soon" or "somewhat soon," which may fail to satisfy traders hungry for a September cut.

The odds of a rate cut in September stood at 81% on Monday, according to Investing.com's Fed Rate Monitor Tool.

Other top central bankers will be in attendance, including Bank of Canada Governor Macklem, Bank of England's Bailey and ECB President Lagarde, who will speak on a panel Saturday. The presence of these global policymakers underscores the intense international focus on U.S. monetary policy.

Job growth has slowed, but remains consistent with tighter immigration policies, leaving uncertainty over the delicate balance between inflation risks and labor market resilience. The note also points to nascent questions about tariffs, immigration changes, and broader macro policies that muddy inflation forecasts.

With financial conditions still broadly stimulative and political pressure mounting, Scotiabank cautions that an early cut could politicize the Fed's independence, especially amid intense criticism from President Donald Trump. The risk of easing prematurely could encourage unwise policies like protectionism, underlining the high stakes as the Fed navigates its path forward, it added,

As markets price in a September rate cut, Scotiabank Economics expects Powell to maintain an extended pause, prioritizing more data and a thoughtful conclusion to the Fed's framework review over premature easing.

Source: Investing.com