Friday morning, Federal Reserve chair Jerome Powell is expected to step to a lectern beneath elk antler chandeliers in Grand Teton National Park in Jackson Hole, Wyoming. He'll deliver a message that will reverberate across trading floors in every global financial center.

• One huge question: To what degree will he push back on the sense of optimism (or, arguably, complacency) that has crept into financial markets over the last two months?

Driving the news: Powell's speech will set the tone for central bank policy in the months, and possibly years, ahead.

• It comes as markets have started pricing in a more benign outlook for the economy, in which inflation comes down without the Fed acting as aggressively to tighten the monetary screws, as seemed likely in early June.

State of play: Since mid-June, the S&P 500 is up 13%, even after accounting for a sell-off underway this morning. Bond yields are down, as are corporate credit spreads — indicating a loosening of financial conditions.

• This partly reflects promising news on inflation, including an unchanged Consumer Price Index for July and signs that supply chains are coming unsnarled.
• If that progress is sustained, the Fed might not end up raising rates as much as has been feared and could find itself easing within the next couple of years.
• But ironically, the more markets price in a benign outlook, the greater the risk that the economy stays too hot for comfort and that inflation fails to come down.

Several presidents of regional Fed banks have pushed back against that possibility this month. But thus far, Powell and members of his leadership troika (vice chair Lael Brainard or New York Fed president John Williams) have avoided joining the chorus.

What they're saying: "We see the Fed and the markets engaged in a tug-of-war over financial conditions," Krishna Guha and Peter Williams with Evercore ISI wrote in a recent note. "Right now the Fed is losing and we think it will need to pull harder in the period ahead to avoid conceding more ground."

Yes, but: The economy remains in a highly delicate position, and Powell and his colleagues would still like to manage a soft landing, if possible.

• If he cranks up the hawkish rhetoric too much, Powell may succeed at tightening financial conditions. But in the process, he may cause more economic pain than is needed.

New appointments at the Fed have brought more women and people of color into the circle of prominent policymakers than ever before.

• The latest is Lorie Logan, the former manager of the New York Fed's huge holdings of cash and securities, who takes the helm of the Dallas Fed today as its first female leader.
• Logan is one of five new faces at the top of the Fed in the past year, including Boston's Susan Collins, the first Black woman to lead a regional Fed bank; Lisa Cook, the first Black female Fed board governor; and Philip Jefferson, another Fed governor who's the fourth Black man to hold the position.

Why it matters: Taken together, the changes mark a swift change at the top of the Fed that gives the century-plus-old institution its most diverse leadership yet.

• There are more changes ahead, with two openings at the top of the Chicago and Kansas City Fed banks. Current leaders, Charlie Evans and Esther George, respectively, will leave next year as required by mandatory retirement rules.

Catch up quick: The Fed board's new appointments are the result of successful confirmations of candidates nominated by the Biden administration, which pledged to bring "new diversity" to the Fed.

• Additionally, the former leaders of the Dallas and Boston Fed left last year in the wake of Fed's trading scandal.

The bottom line: The Fed still has plenty of work left to diversify its top ranks (and its staff). For one, there's never been a Latino leader at the Fed, as Bloomberg points out — a fact that led one Democratic lawmaker to vote against confirming Powell to another term as Fed chair.