Bond investors are closely watching Jerome Powell’s speech on Friday, expecting signals that the Fed may begin cutting interest rates as soon as next month.

The speech, scheduled for 10 a.m. in Jackson Hole, Wyoming, is key because Powell has often used this event to deliver major policy signals. While some recent Fed comments and economic data have been mixed, markets still expect a 70% chance of a rate cut in September and about 50 basis points of easing in 2025.

Powell is facing pressure from President Trump and others to cut rates, though the Fed has held steady between 4.25% and 4.5% since December. Jackson Hole could be an opportunity for Powell to reaffirm the Fed’s independence.

A hawkish tone could push bond yields higher, especially short-term ones, and challenge recent bets in the options market on aggressive cuts. Powell may avoid committing to a rate path, instead stressing that upcoming jobs and inflation data will guide the Fed’s decision in September.

This cautious stance may keep bond yields in their current range, with the 2-year around 3.75% and the 10-year near 4.30%. Yields have already dropped slightly this month after weak July jobs data, with 10-year yields holding at 4.33% in Friday’s Asian trading.