Investors eye Fed Chair Jerome Powell speech: Morning Brief

Friday, August 23, 2019

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All eyes will be on Federal Reserve Chairman Jerome Powell when he speaks at the Fed’s annual Jackson Hole Economic Policy Symposium.

Powell is scheduled to speak at 10 a.m. ET about the “Challenges of Monetary Policy.” Economists and investors have a wide range of expectations for Powell’s speech. “There’s a risk that, in his remarks at the Fed’s Jackson Hole Symposium Friday morning, Powell will push back on market expectations for another 100-plus basis points of rate cuts by end of 2020, but we are not holding our breath,” Capital Economics predicted in a note on Wednesday.

Powell’s speech comes on the heels of the Federal Open Market Committee’s (FOMC) release of its July meeting minutes on Wednesday afternoon. The minutes revealed that most Fed officials viewed the July rate cut as a mid-cycle adjustment as opposed to the beginning of a long-term easing campaign. At the end of the most recent FOMC meeting, the committee cut interest rates for the first time in more than a decade, and markets are expecting more cuts ahead. With current risks weighing on the U.S. economy, Fed officials stressed the need for policy flexibility. Two FOMC members dissented from the Fed’s latest rate-cut decision and felt that no rate cut was needed at the time.

“We will hopefully get more clarity on future rate cuts when Powell speaks on Friday but, at this point, there is little sign that the Fed is willing to push back on the markets. As such, another 25bp cut in September still looks like a good bet, if only because the Fed will not want to disappoint lofty market expectations,” Capital Economics explained.

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