WSJ What’s News - Fed Signals a Key Policy U-Turn

Episode Date: August 22, 2025

A.M. Edition for Aug 22. Jerome Powell is set to speak at the Jackson Hole symposium this morning, where WSJ editor Quentin Webb says the Federal Reserve Chair is expected to detail a significant policy shift on an economic strategy that soured. Plus, the Trump administration considers taking equity stakes in companies receiving Chips Act funds. And, in our Price of Parenting series, WSJ’s Sandra Kilhof speaks to personal finance reporters Veronica Dagher and Joe Pinsker for some money-saving hacks to help with the hidden costs of raising a child. Azhar Sukri hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

With all eyes on Jackson Hole, Federal Reserve Chair Jerome Powell is set to announce a key policy U-turn. Plus, why the Trump administration is keen to take equity in some chipmakers, and in our Price of Parenting series, we look at the hidden costs of raising children. There are these ways that having a kid makes you change almost like the basic infrastructure of your life and buy things that aren't exactly diapers, but they're certainly, It's Friday, August the 22nd. I'm Asha Sucre for the Wall Street Journal. Here is the AM edition of What's News, the top headlines and business stories moving your world today. With the central banking world's most closely watched annual address due this morning in Jackson Hole,

Federal Reserve Chair Jerome Powell, is expected to detail a significant policy U-turn. The speech offers him a high-professional. opportunity to explain the conclusions of a month's long review that abandons some key innovations about how the central bank approaches employment and inflation, while rebutting charges that those changes contributed to the worst inflation surge in four decades. Journal Deputy Finance editor Quentin Webb is here with more. Quentin, economists have criticised the Fed for making this shift back in 2020, right as the pandemic struck, kicking off that big spurt in inflation that we saw. Is this U-turn a response to that

criticism? In some senses, yes, but the Fed is obliged every five years to conduct a review of its framework. So it is doing that to that timetable. It is rethinking whether the innovations that put in place in 2020, which was sort of designed for a low inflation, low growth world, a fit for purpose now we're in a very different macroeconomic environment. So for example, the Fed gave itself the flexibility to allow inflation to run a little bit hotter than its target for a while, if it had previously run a little bit cooler. The idea was that you needed to get away from a situation where you were stuck with very low interest rates and very low inflation. But that no longer seems to be the problem that we're facing. There was a live debate

at the time about the extent to which price rises were transitory rather than something that would feed into sustained inflation, and some would say it's not clear that a different framework would have necessarily made the Fed much more nimble in its response. And in the previous iteration of the framework on the unemployment side, the Fed gave itself some flexibility by saying it would only focus on when joblessness was too high and it would be less concerned if actually the labour market was very tight. Now, that asymmetry may not survive the new version of the framework. Now, assuming that this shift makes the Fed more able to handle future shocks, what is the outlook then for interest rates in the near term? That's the other big question on everyone's minds about Jackson Hole today.

To what extent will Fed Chair Jerome Powell signal that a rate cut is coming as soon as the next meeting in September? Or to what extent will he suggest that they remain data dependent and the data hasn't yet given them confidence that the labour market. is weak enough that a cut is justified. General Deputy Finance Editor Quentin Webb, thank you so much. Thank you. Jerome Powell is expected to speak this morning from Jackson Hole at 10 a.m. Eastern. Now, staying with the Fed, we are exclusively reporting that two central bank officials are offering competing assessments of the labour market,

underscoring the trade-offs when considering whether to cut interest rates next month. Cleveland Fed President Beth Hammock told the journal, the labour market remains, quote, reasonably good and does not support a reduction, saying the inflation picture appears to be heading in the wrong direction. In a separate interview, Boston Fed President Susan Collins shared Hammock's inflation concerns, but signalled openness to a rate cut as soon as next month, saying she sees more risks of weaker than expected employment trends and the potential impact of tariffs on purchasing power.

And we are exclusively reporting that equity stakes may soon become a larger part of the Trump administration's approach to chip makers, with a government official telling the journal that the White House is interested in owning equity in some companies that receive money from the 2022 Chips Act. The official said the administration isn't looking to own equity in companies like Taiwan semiconductor manufacturing that are increasing their investments in the U.S. But businesses that aren't boosting their pledges could need to give the government equity in exchange for Chips Act subsidies, the latest sign of how the administration is rewarding

or punishing tech companies based on their investments. The possible move comes as the administration has been in talks to take a 10% equity stake in Intel, which Commerce Secretary Howard Lutnik confirmed while speaking to CNBC earlier this week. Coming up, we've got some money-saving tips in the latest episode of our series on The Price of Parenting. That's after the break. Now, as we've discussed this week, it's more expensive than ever to raise a kid.

So for our penultimate episode on the economics of parenthood, we've been speaking to new parents about whether having a child, turned out to be more or less expensive than they expected. Our supervising producer Sandra Kilhoff spoke to journal personal finance reporters Veronica Dagger and Joe Pinsker and got some tips on how to save money. Joe, I am just super excited for this conversation today because being a mom of two kids under three myself, I've actually been really shocked to discover how expensive it is to have kids, despite how well we're trying to save money.

What did some of the new parents you spoke to say about this? Unsurprisingly, many of the parents that I interviewed said that even though they were fully prepared for parenthood to be really expensive, it still managed to be even more expensive than they thought. Specific numbers were really illuminating. One family went from about $3,000 in monthly spending to about $4,000. Another had a bigger jump from $5,000 to $8,000. And some of this was on expected and routine expenses, like, diapers. Some of it was just like ordering something completely out of desperation online at three

in the morning. But what really came through is that when you have a problem with a baby, there's always something you can buy to try to solve it, whether it'll actually solve your problem or not. I should also mention there's this category of costs where you can end up really, really racking up some large bills. To give you a few examples from my conversations with parents, they mentioned buying smart home temperature sensors because the baby would only sleep at a very specific temperature. That was a $90 expense. Another couple mentioned a blackout sleep tent to put over their baby's sleeping area while traveling. That was $200. Basically, there was just this world of products that some parents expressed surprise about even existing. And that was one of the big areas where people

ended up spending a lot more than expected. And then one other interesting theme that arose from these interviews that I did was that there are also indirect expenses. One mom told me about having to buy an entirely new wardrobe because she sized up after giving birth. Another started leasing a new car because they just wanted to have more faith in the car they were driving now that they had a baby. So there are these ways that having a kid makes you change almost like the basic infrastructure of your life and buy things that aren't exactly diapers, but they're certainly kid-related. There's so many things I can identify in what you just said there, Joe. Veronica, I want to bring you in because there's a lot of expenses here, but I know you've also been

talking to parents who have been able to save some money on those expenses. Help us, bring me those tips, please. There's some examples, and it takes a little creativity and planning, but there is ways to save money. One of my favorite tips, and I have a four-year-old, so I can really relate to this, is the cost of babysitting is so high. And this person I spoke to is in the D.C. area. It can cost $25 per hour. So if you want to do a day night with your spouse, you can easily hit 100 bucks before you even leave the house. And so what these folks I spoke to do is they set up a babysitting swap with another couple. One couple puts their kids to bed and once the children are asleep, one parent from the other couple comes over to babysit while the parents head out for a date night.

And the visiting parent can just be there in case the kids will wake up or if there's an emergency. And then on another night, they swap roles. So the second couple gets a turnout. There are also quite a few examples of things that parents don't really need at all. Like, I remember reading one particular parent book that had a list of things that you absolutely should not buy. This included, according to this book, a fancy leather changing bag or a Moses basket not being an essential. I wonder, Veronica, what some of the parents you spoke to have to have to say about, I guess, saving money on things that aren't essential? Well, they gave some tips in the regards when it came to sporting gear.

So if you have kids who are school-aged and they're trying different sports or they're growing very quickly and they need sporting equipment, a few parents said, look, don't buy new sporting equipment if you can avoid it. Head to things like local buy nothing groups or consignment stores and even gear swaps. You can get things like skis or soccer shoes or even a bike gently used for free. One gentleman I spoke to has been doing this with his daughter for the past 12 years, and it's been an effective strategy. And now she's the one who says, oh, I want this piece of equipment. Can we ask the buy nothing group? And so that's sort of a nice way to save money, but also teach your kids that not everything needs to be brand new and you don't have to pay top dollar for everything. Veronica, that kind of foresight surely also sets up kids with a really good sense of budgeting. You can start early. For example, As I mentioned, I have a four-year-old, and we go to the grocery store, and he wants one of everything, especially if he sees his favorite character on some food or a snack. And another parent I spoke to said, oh, yeah, my kids do the same thing. And they go to the grocery store and they

see something with the Paw Patrol logo on it, and they get a case of the gimmies. And so this parent wards off impulse buys by keeping a stash of character-themed stickers at their house, and they get them from the dollar store. And so whenever the kids spot a character or theme item or snack at the store, they just say to their kids and their kids are like four and six. They say, oh, we have a better one at home. And then they buy like a generic version that's probably a lot cheaper and apply the stickers to what they already own. And so these kids are happy to get something similar to what they wanted. It's a win and it saves the parents money. And then it also exposes the kids the idea of tradeoffs. Like you don't have to have exactly what you want all the

time. And there's ways to get what you want in a cheaper way. Veronica Dagger and Joe Pinsker are personal finance reporters for the journal. Veronica, Joe, thank you so much. Yeah, thanks for having us. Thanks for having us. And that's it for what's news for this Friday morning. Today's show was produced by Kate Bullivant and Caitlin McCabe. Our supervising producer was Daniel Bark.

I'm Azhar Sukri for the Wall Street Journal. We'll be back tonight with a new show. Until then, have a great weekend, and thanks for listening. Thank you.