Investors had been nearly certain the Federal Reserve would cut rates in September, but fresh producer price data is complicating that view ahead of Chair Jerome Powell’s speech at the Jackson Hole Symposium later this week.
Markets still assign an 85% probability to a 25 bps cut, according to CME’s FedWatch tool, but that’s down from more than 95% just a week ago. Bank of America is now calling for no change in September, warning that tariffs and sticky inflation could force policymakers to hold rates higher for longer.
Rate-Cut Hopes Tested
Analysts had long penciled in multiple cuts for 2025, with September flagged as the likely kickoff. But the latest inflation data is pulling sentiment in the opposite direction, leaving expectations more fragile than they’ve been in months.
Jackson Hole has historically served as the stage for major policy shifts, and many are watching for Powell to deliver a similar inflection point this week. Last year, his remarks signaled the Fed was ready to pivot, just weeks before its first post-pandemic cut.
This year, the theme of Powell’s address — “Economic Outlook and Framework Review” — suggests the market may get fresh clues on how the Fed is thinking about the path forward.
Market Snapshot
U.S. Equities (pre-market):
S&P 500: -0.3%
Nasdaq: -0.4%
Dow Jones: +0.08%
S&P futures: -0.08%
Europe:
FTSE 100: flat
DAX: -0.3%
CAC 40: -0.6%
Asia:
Nikkei 225: +0.77%
SSE: +0.85%
Hang Seng: -0.37%
Global markets remain cautious, with little direction from last week’s political headlines, including President Trump’s meeting with Russian President Vladimir Putin.
Looking Ahead
As Deutsche Bank noted, Powell’s Jackson Hole speeches have historically carried weight:
“The Fed chair’s speech at Jackson Hole has often been used to send important policy signals… Last year Powell said the ‘time has come for policy to adjust,’ and the Fed cut rates at the very next meeting.”
With rate-cut confidence slipping, Powell’s words later this week could set the tone for the rest of 2025.
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