The annual Jackson Hole gathering of central bankers has often served as a stage for policy signals with global reverberations. This year, the spotlight fell firmly on US Federal Reserve Chair Jerome Powell, whose comments marked a subtle but significant shift in tone. Markets, long hoping for relief from restrictive interest rates, read his speech as confirmation that a September rate cut is now more likely than not.

Yet behind this dovish turn lies a complex balancing act that reveals as much about politics as it does about economics. Mr Powell’s message was carefully crafted. He acknowledged that tariffs have driven consumer prices higher, a reality that households can see on store shelves. But he also argued that the inflationary effect is probably temporary, a one-time adjustment rather than the start of a wage-price spiral. This framing matters. If the Fed believes tariff-driven inflation is........

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