ORLANDO, Florida, Aug 25 (Reuters) - Federal Reserve

Chair Jerome Powell is coming under fire for appearing to cave

to political pressure in his Jackson Hole speech on Friday,

which opened the door to an interest rate cut next month, a

shift from his more hawkish stance only a few weeks ago. But the

charge is unfair.

The heat is based not just on the economic justifications

for his apparent about-face, but the politics, namely the

accusation that he 'caved' to President Donald Trump's incessant

pressure to lower borrowing costs.

Powell was in a no-win situation. He essentially had three

potential avenues to go down when delivering the near-term

policy outlook, all of which left him open to charges of

political motivation.

First, he could have maintained the somewhat-hawkish steer

he provided in his July 30 press conference when he signaled

that the rate-setting committee was in no rush to adjust policy

and that more data was needed to justify a move.

But two days later came the unequivocally weak July

unemployment data, including downward revisions to May and

June's job figures that were among the largest on record outside

of a crisis or recession. This, unsurprisingly, sent the

market's expectations for rate cuts soaring.

If Powell had simply held the July 30 line in his Jackson

Hole speech despite the new data, he wouldn't have come across

as mildly hawkish but unabashedly tight.

Moreover, he would likely have been accused of politically

motivated stubbornness, with pundits arguing that he was

refusing to budge simply because he wanted to show Trump that he

would not buckle under presidential pressure.

That same charge would, of course, have also been leveled if

he had taken the second route, signaling that the uncertain

inflation dynamics made any thoughts of a rate cut now far too

premature.

That takes us to the third option. That's the one Powell

took when he indicated that the time to adjust policy was likely

approaching because of the worrying signs of weakness in the

labor market.

This isn't a commitment to ease policy, but an

acknowledgement that it's a strong possibility. It's also a

signal that the incoming economic data, specifically the August

employment and CPI inflation reports, will largely determine

whether the Fed cuts rates on September 17.

None of that suggests political interference is at play.

LABOR OF DOVE

The market seems to agree.

If rates traders believed easing now was a policy error -

given that inflation is still above target and could rise

further - longer-dated yields should have risen. They didn't.

The 10-year yield actually fell nearly 8 basis points.

Ten-year inflation swaps also dropped slightly to 2.43%,

roughly where they have been trading, on average, over the past

three months.

Tellingly, Powell's speech also failed to dramatically alter

the market's monetary policy expectations. U.S. rate futures

closed on Friday roughly where they had traded for most of last

week, pricing in around an 80% chance of a rate cut in September

and a near-100% probability of another one by December.

In short, not much to see here. Not yet, anyway.

To be sure, the economic case against Powell's dovish shift

is a strong one. Inflation is currently around 3%, and has been

consistently above the Fed's 2% target for more than four years.

Inflation expectations are also higher than the Fed would like,

even before factoring in any potential pass through from Trump's

tariffs.

In addition, financial conditions are looser than they have

been in years, with stocks and other assets hitting record

highs.

So why consider cutting interest rates? The argument appears

to be based on two beliefs: first that tariffs will be a

one-time hit to prices and thus should not lead to an

inflationary spiral; and second that unemployment has the

potential to shoot up quickly, meaning the Fed is wise to get

ahead of the curve.

Powell is clearly in an unenviable position. The two sides

of the Fed's dual mandate - maximum employment and stable prices

- are in tension, with data indicating looming risks on both

sides. And this conundrum has been made doubly difficult by the

public political pressure.

Powell was caught between Trump and a hard place. He did the

best he could.

(The opinions expressed here are those of the author, a

columnist for Reuters)