In the next two days, global markets' eyes are focused on one place, the Jackson Hole forum for central bank governors. Don't underestimate this meeting; historically, every major shift in monetary policy has almost always had signals released from here. Think back to 2010, when Bernanke hinted at a second round of quantitative easing and the market immediately became agitated. In 2020, Powell directly announced the average inflation targeting system, shocking the market. In 2022, it was even more intense; Powell spoke for just 8 minutes, and US stocks directly fell by 3.4%. So, this meeting is not just a tea party; it's the epicenter of the global capital market.
Why is the year 2025 particularly important? Because the Federal Reserve is at a crossroads in monetary policy, deciding whether to cut interest rates in September. According to CME data, the probability of a rate cut has reached over 94%, with discussions around 25 or 50 basis points. But don't forget, at the July meeting, for the first time in 30 years, two members voted against the consensus. Hawks fear inflation could reignite, while doves are worried about continued job losses, so there is significant internal conflict.
The core highlights of Powell's speech this time are four:
- Firstly, will he directly hint at whether the interest rate cut in September will be 25 or 50 basis points?
- Secondly, it is the Federal Reserve's annual assessment of its monetary policy framework, and this time it may involve the cheese of the average inflation targeting system.
- Thirdly, how do we view the US economy? Now the core CPI has returned to 3.1%, with an unemployment rate of 4.3%, how do we balance this?
- Fourthly, signals of global monetary policy coordination, with the UK and Japan both grappling with whether to raise interest rates, and Europe showing signs of inflation rebounding, how should we respond?
Why is the market holding its breath? It's simple, a single word from Powell can send global asset prices on a roller coaster. If the interest rate is cut on time, US stocks are likely to hit new highs again, with tech stocks and real estate stocks soaring. If they continue to adopt a hawkish stance focused on inflation, growth stocks might face a major hit. And let's not forget, US Treasury Secretary Yellen is also calling for a direct cut of 50 basis points. The problem is, if the Federal Reserve really succumbs to political pressure, the market will again question whether your 2% inflation target is still reliable.
Looking at historical experience, on the day of the speech in 2022, the S&P directly dropped by 3.4%, and last year also caused severe turbulence. Traders are currently reducing their positions to avoid risks, fearing sudden fluctuations. Moreover, what's more troublesome is that there are a bunch of 'bombs' around this meeting. On August 21, the Federal Reserve's meeting minutes, global PMI data including Japan's CPI are due; if these data coincide with Powell's signals, the market may really face a stormy week.
For investors, the core logic is summed up in one sentence: this is not an academic seminar, but a battle of expectations. The dollar, bonds, gold, and stock markets could all see significant volatility. If the sentiment leans dovish, sectors like technology, new energy, and real estate may benefit, while if the trend shifts hawkish, defensive sectors like consumer staples and utilities will provide more security.
Finally, a reminder about the timing: Powell's speech will start at 10 PM Beijing time on August 22. Everyone must keep a close eye on this, as it could be the nuclear button determining the direction of asset prices for the next quarter. Therefore, next week the market will hold its breath waiting for Powell's signals; it could either lead to salvation or slaughter.
