Federal Reserve Chair Jerome Powell is expected to map out the final steps in the U.S. central bank’s campaign to tame inflation and reinforce its commitment to finishing the job, when he speaks Friday in Jackson Hole, Wyo.

While the address may not contain the same drama as keynotes in recent years, Powell’s speech at the Fed’s annual confab of global central bankers comes as policymakers enter what he’s called the most difficult stage of the inflation fight – calibrating how much more tightening is needed, with little certainty about how their actions have affected the economy so far.

Federal Reserve Chair Jerome Powell will speak Friday at the Fed’s annual confab of global central bankers.  Jacquelyn Martin/Associated Press

Until recently, the way forward had been clear: Keep raising interest rates to bring the fastest inflation in four decades under control. Now, as inflation continues to cool, disagreements among policymakers are emerging over how much more work is left to do. Powell will likely use his platform this week to outline how the Fed will assess whether rates should go higher and determine when it’s time to start cutting them.

“He will caution against easing too soon. I think that’s going to be a theme here,” said former Fed Vice Chair Donald Kohn. “It would be helpful for him to spell out what he means by data dependence, tamping down the very strong reaction of markets to each piece of data.”

Powell is scheduled to deliver a speech on the outlook at 10:05 a.m. Eastern time on Friday morning as part of the Kansas City Fed’s annual economic policy symposium, held in the shadows of the Teton mountain range. European Central Bank President Christine Lagarde will also speak later in the day.

The gathering comes as monetary policymakers around the world are still facing above-target inflation rates and elevated chances of economic downturns. The challenge in the year ahead will be to balance increasingly two-sided risks, as they attempt to bring price pressures under control while avoiding recessions.

Since Powell’s famously blunt address at the conference last August – short and to the point, he emphasized the central bank’s resolve to quash inflation – Fed officials have ramped up their benchmark rate to a 22-year high of 5.25% to 5.5%.

So far, inflation gauges have come down substantially from a year ago, and the economy has shown few signs of suffering from tighter monetary conditions. But Fed officials are increasingly divided into two camps as inflation risk recedes and other economic risks mount.

One faction argues that higher rates have yet to fully work their way through the economy, and worry that an ongoing tightening of credit conditions will have a bigger impact than intended. A drawdown of pandemic-era savings and a resumption of student-loan payments this fall could add to headwinds.

Others say the lags with which monetary policy is transmitted to economic activity are not so long anymore, and they argue much of the effect of higher rates has already been felt. They also want to see more concrete evidence that inflation is on track to return to its 2% target.

As investors have become less certain about what to expect next from the Fed, volatility has risen in recent weeks, with the market’s fate seeming to hang on every new piece of economic data.

Markets currently do not expect another rate increase this year, according to futures contracts, though they see a greater chance of a hike at the Fed’s Oct. 31-Nov. 1 meeting then at its next gathering on Sept. 19-20.

Jackson Hole will give Powell more room to home in on key components of his strategy, including the Fed’s focus on more than just inflation reports.

“We expect him to continue to stress that the Fed will be data-dependent and consider the ‘totality’ of the data, keeping September a live meeting,” Morgan Stanley economists led by Ellen Zentner said in a recent note to clients.

A resilient economy in the face of rapid rate hikes has also fanned speculation that the so-called neutral interest rate – at which policy is neither stimulating the economy nor slowing it – might be higher than it was before the pandemic. The yield on 10-year Treasury securities rose as high as 4.35% this week for the first time since 2007, reflecting expectations that rates may remain higher.

Investors are looking for Powell to weigh in on Friday. But Fed officials have largely taken an agnostic view of the question – their latest estimates published in June suggested they thought it remained unchanged from before the pandemic at 2.5% – and Powell is unlikely to deviate from that approach. “Honestly, we don’t know” where the neutral rate is, he told lawmakers in March.

In his first Jackson Hole speech as Fed chair, in 2018, he emphasized the inherent uncertainty around estimates of such long-run variables. But he also stressed that, in the event of such dire developments as a financial crisis or unanchored inflation expectations, the Fed would have to “do whatever it takes” to solve the problem.

Last year, with inflation at 40-year highs, Powell’s address took the latter tack. This year, it may be time to revert to the earlier scenario.

“There is no way Powell’s speech can be that tight and clear this time because the economic outlook is genuinely more uncertain,” said Adam Posen, president of the Peterson Institute for International Economics.

“Central bank decision-making in some sense is easier when you have policy wrong, and you have a long way to get to where you should be,” Posen said. “It’s more difficult when you have to sort through being close to the right policy but not sure you’re there, and that’s where the Fed is now.”