All eyes this week will be on the Jackson Hole valley, where Chairman Powell and global central bank leaders will meet to discuss the upcoming economic policy. The focus will be on Powell's speech at 21:00 on 22/08 - expected to shed light on upcoming interest rate moves.
At last year's event, the FED chairman signaled a pivot to easing, saying, 'It’s time for policy to adjust' and 'increasingly confident that inflation is on a sustainable path back to 2%.' The market reacted positively immediately, with US stocks, Gold & Crypto all rising sharply.
This year, the market is almost certain that the FED will cut interest rates at the September meeting, with the probability on CME still at ~84.8%. The reason is that:
- At the June meeting, the FED expected to cut interest rates twice this year.
- Employment data shows that the US labor market has weakened.
However, some more hawkish analysts believe that Powell may still be very cautious because:
- The basis for the FED to cut interest rates in September is uncertain as inflation in the US is still above the 2% target and has recently shown a tendency to heat up.
- The debate revolves around whether the recent deterioration in employment data is due to weak labor demand or a labor supply shortage. If the problem lies in a lack of workers, then cutting interest rates could easily cause inflation to 'take off.'
- There are still many important employment reports to monitor before the FED's September meeting.
In summary, some analysts do NOT agree that it is certain the FED will cut interest rates in September. And even some who expect rate cuts are not sure Powell will reveal that at Jackson Hole.