Can Powell's speech tonight sound the prelude to a policy shift? The market awaits clear signals for interest rate cuts!
Federal Reserve Chairman Powell will speak tonight at 10 PM at the Kansas City Fed's annual central banking conference in Jackson Hole. The market expects the following key points from his speech:
Interest rate cut path: Whether Powell will confirm expectations for a rate cut next month will be the focus of this speech. Currently, most institutions expect Powell to take a neutral stance, not providing clear signals and continuing to emphasize a data-dependent decision-making approach, but the market remains concerned about his rebuttal to the September rate cut expectations;
Policy framework review: The review of the Federal Reserve's policy framework has become one of the focal points of Powell's speech. Several major investment banks expect Powell to possibly downplay the flexible average inflation targeting (FAIT) introduced in 2020, returning to a more traditional policy statement that emphasizes a more balanced approach to both employment and inflation targets;
Inflation concerns: Powell may acknowledge that CPI has moderated but is still above the target and address related issues of surging PPI. He will continue to indicate a need to be wary of the stickiness of service sector inflation and potential pressures from tariffs, emphasizing the importance of stabilizing inflation expectations;
Labor market: Powell may respond to the cooling of non-farm data and significant downward revisions, and he may acknowledge the cooling of the job market and the decline in new job potential, but he may downplay the impact of individual labor data, emphasizing the need for a comprehensive assessment based on multiple indicators;
Political pressure: Powell is likely to avoid discussing the political pressures he faces during his speech, stating that he will focus on doing his job well. Trump has repeatedly criticized Powell publicly, and government officials have continuously pressured the Federal Reserve, recently even calling for the immediate dismissal of Fed Governor Cook.
