One Year Later, Powell Faces a Changed Economy and Market

When Jerome H. Powell spoke at the Federal Reserve Bank of Kansas City’s annual Jackson Hole conference in Wyoming last year, inflation had recently topped 9 percent and the Fed was raising rates at a breakneck pace to wrestle down price increases. Mr. Powell used the platform to offer a stern warning that central bankers would keep at it until the job was done.

A year later the picture is very different. Higher rates have cooled the housing market and, together with healing supply chains and cheaper gas prices, lowered inflation notably — to 3.2 percent in July.

Instead of warning that the central bank is prepared to push the economy into a recession if that is necessary to calm rapid inflation, Fed officials today are increasingly suggesting that they might pull off what once seemed unlikely: cooling the economy without tanking it.

As he returns to the conference this year, Mr. Powell, who is set to speak Friday morning, is still expected to emphasize that the Fed has more work to do in bringing inflation the whole way back to normal. But many economists and investors think that he may be able to strike a slightly less aggressive tone than he did last year.

“I expect Jay Powell to avoid anything resembling ‘mission accomplished,’” said Jason Furman, an economist at Harvard University — adding that Mr. Powell could suggest that there is more to do, but would not need to sound so ominous to Wall Street. “Unlike last year, Powell doesn’t need to scare anyone.”

Mr. Powell’s grave language a year ago — he signaled that the Fed expected to inflict economic pain in its quest to cool inflation — was partly a rebuke to investors who, at the time, remained skeptical that the Fed would continue to raise interest rates sharply. His comments sent financial markets reeling as they recalibrated.