Jackson Hole Symposium and September’s Fed Rate Cut

The upcoming speech by Federal Reserve Chair Jerome Powell at the Jackson Hole Symposium is highly anticipated, but it is unlikely to contain any major surprises.

Powell’s speech, scheduled for 10 a.m. ET (14 GMT) will be delivered during the Fed’s annual gathering of global central bankers in Jackson Hole, Wyoming. The conference theme is “Reassessing the Effectiveness and Transmission of Monetary Policy.”

One key question is whether the Fed will opt for a quarter-point or a half-point cut. A larger cut would likely require significant deterioration in economic data, particularly in the labor market. Powell is not expected to provide explicit guidance on this matter during his speech.

Historically, Powell has used his Jackson Hole addresses to outline broad policy directions and provide clues about future actions. This time, his task will be to confirm market expectations for rate cuts while assessing the economy, particularly in terms of moderating inflation and labor market concerns.

The CME FedWatch Tool, which derives the probability of a rate cut from Fed Funds futures prices, today is giving a 75.5% 25 bp cut for the 18 September meeting, and a 24.5% 50 bp cut. While the Symposium is expected to not address this event, it remains however a compass for the trend of next rate cuts, which are likely to continue next year, given the data driven approach for evaluating current health of the economy and the implication of forecasting.

Overall, the tone of Powell’s speech is expected to lean dovish, reflecting confidence in the Fed’s progress against inflation and awareness of downside risks in the labor market. While the Fed typically avoids reacting directly to market movements, Powell is likely to acknowledge recent economic challenges and reassure the markets that the Fed is prepared to begin easing rates as expected.