Federal Reserve Chairman Jerome Powell to Hint at Rate Cut at Jackson Hole Symposium
Federal Reserve Chair Jerome Powell is set to deliver a speech at the Jackson Hole Symposium on Friday at 10 AM, where he is expected to provide clues about a potential rate cut at the upcoming September FOMC meeting. This comes after the recent core CPI data showed a slight month-over-month increase, indicating a possible downward trend in inflation.
Citi economists believe that the focus has shifted from whether the Fed will cut rates to how quickly and significantly it will happen. They foresee 50 basis point rate cuts in both September and November, but Powell is likely to emphasize that these decisions are dependent on economic data.
Powell's speech will likely address the changing risks in the economy, with concerns about the labor market taking priority over inflation. The recent data showing cooling inflation and a softening labor market could provide justification for more aggressive rate cuts.
The Citi economists point out that Powell may argue for rate cuts to prevent overly restrictive monetary conditions as inflation decreases. Additionally, the rapid loosening of the labor market could prompt Powell to move policy rates back towards neutral more quickly.
Despite some positive economic indicators like retail sales and jobless claims, Powell is expected to maintain his view that the U.S. economy will avoid a recession. However, with the 'Sahm rule' suggesting a high risk of recession, Powell's focus on employment mandates may become even stronger.
Overall, Powell is likely to use his Jackson Hole speech to signal that the Fed is prepared to respond to evolving economic data with potential rate cuts. While he may not explicitly commit to 50 basis point cuts, he will keep them as an option on the table. This speech could set the stage for larger rate cuts in the future, grounded in a clear macroeconomic rationale to avoid panic in the markets.
Analysis:
Federal Reserve Chair Jerome Powell's upcoming speech at the Jackson Hole Symposium could provide insight into potential rate cuts in the near future. The focus on labor market concerns over inflation signals a shift in the Fed's policy direction. Powell may use this speech to lay the groundwork for more aggressive rate cuts, responding to weakening economic indicators. This could have implications for interest rates, borrowing costs, and overall market sentiment, affecting individuals' finances and investment decisions. Stay informed and watch for updates on Powell's speech for potential market impacts.