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Federal Reserve officials gather in Jackson Hole in two weeks for a symposium that arrives at a genuinely pivotal moment for the central bank. All eyes will be on Chair Kevin Warsh’s first speech in that role, historically a venue Fed chairs use to set the table for upcoming policy decisions or signal structural shifts in approach. This year, the stakes are higher than usual, following a July 29 meeting that left markets confused and a policy committee that appears genuinely divided.

At that meeting, the Fed held rates steady at 3.50% to 3.75% for a fifth consecutive session, as expected. What rattled markets was Warsh’s press conference performance, where he repeatedly deflected questions about why the Fed was not raising rates and suggested that rising bond yields themselves were doing some of the Fed’s tightening work. Markets responded by aggressively pricing in more than two rate hikes in the weeks that followed, alongside genuine uncertainty about whether the committee has a coherent strategy at all.

Since that meeting, the incoming data has offered modest relief. Core CPI rose 2.5% year over year in July, marking a second consecutive month of cooling from 2.6% in June and 2.9% in May. Producer price data told a more mixed story. Core PPI, excluding food, energy, and trade services, rose 4.7% year over year, slightly hotter than expected though down from June’s 5.1% pace, while the monthly reading cooled to 0.2% from an upwardly revised 0.4% in June.

Both figures feed into the Personal Consumption Expenditures price index, the Fed’s preferred inflation gauge, due for release August 26, just days before the Jackson Hole gathering. Economists estimate core PCE rose somewhere between 0.16% and 0.3% in July, a range wide enough that it genuinely could push the committee in either direction.

The range of professional forecasts illustrates just how unresolved this debate is. Some economists estimate July’s core PCE reading held firm enough to keep the annual rate sticky near 3.3%, arguing that could actually harden the resolve of policy hawks rather than ease it. Others view the broader disinflation trend, tied to fading tariff effects and easing oil prices following the resolution of Strait of Hormuz disruptions, as evidence the Fed can remain patient through year-end, while still leaving the door open to tightening if price pressures reaccelerate. A third camp sees the data pointing toward a soft enough reading to pull the three-month annualized core PCE rate down to 2.5%, which would make a September hike look considerably less likely than markets currently expect.

That range of outside opinion mirrors a genuine split inside the Fed itself. Cleveland Fed President Beth Hammack, who dissented in favor of a hike at the July meeting, has continued arguing publicly that more than one rate increase is needed to bring inflation fully under control. Meanwhile, New York Fed President John Williams has suggested that if monthly core PCE consistently prints around 0.2% through the second half of the year, it would signal inflation returning to target on its own, without further tightening. Former Atlanta Fed President Dennis Lockhart, now outside the institution, has cautioned that one or two encouraging months of data is not persuasive evidence that underlying inflation pressure, elevated for more than five years, is genuinely breaking, particularly with the labor market still near full employment.

For companies operating below the $2 billion market cap threshold, this unresolved debate matters directly. Small and microcap companies carry disproportionately more variable-rate debt than large cap peers, making their borrowing costs highly sensitive to exactly the kind of uncertainty currently surrounding the Fed’s next move. The market will receive one more full month of inflation data, including the volatile August CPI report, before the September meeting itself, meaning the path forward remains almost entirely data-dependent. Warsh’s Jackson Hole speech will be the first real signal of how he is weighing that data, and small cap investors watching the cost of capital heading into the fall would do well to treat it as required listening.