Anticipation of Rate Cuts and Powell’s Final Speech
The market anticipates the resumption of rate cuts in the United States for the scheduled September decision, but they are closely watching signals from members of the Federal Open Market Committee (FOMC) at the Jackson Hole symposium.
Analysts from Barclays believe that FOMC members will send clearer signals about their path in the coming months following the symposium, as current economic data for the September decision present mixed signals that don’t argue for an upcoming rate cut.
Jerome Powell’s Relevance and Upcoming Departure
Barclays analysts highlighted that Jerome Powell’s participation in the symposium will be particularly relevant, as he delivers his final speech as Fed chair, with his term ending in May. His conference is scheduled for 10 AM on Friday, August 22, and will mark the end of his seven-year leadership at the US central bank.
The annual Jackson Hole policy symposium, organized by the Federal Reserve Bank of Kansas City in the United States, will take place from August 21 to 23. It is one of the world’s oldest central bank gatherings, where economists, market participants, academics, and central bankers discuss financial policy matters and global events over three days.
Market Probabilities and Current Economic Indicators
In a note to clients, Barclays analysts explained that the market assigns a 90% probability of a 25-basis-point rate cut for the September 16-17 meeting.
However, they acknowledged that the US inflation rate is 0.8 percentage points above the Fed’s target of 2%, and the unemployment rate stands at 4.2%, slightly above January’s 4%. These factors technically make it difficult to expect a rate cut.
The FOMC has kept the rate unchanged since January, between 4.25% and 4.50%, pausing a cycle of three consecutive rate cuts applied in September, November, and December of the previous year.
Since taking his second term as US Fed chair, Donald Trump has publicly expressed dissatisfaction with this pause in rate cuts, emphasizing the need for immediate rate reductions to stimulate the US economy and assist Americans with spending.
Labor Market Focus at Jackson Hole 2025
The annual Jackson Hole policy symposium, themed “Transitioning Labor Markets: Demographics, Productivity, and Macroeconomic Policy,” will also feature Christine Lagarde, President of the European Central Bank (ECB), speaking on Saturday, August 23.
The Jackson Hole gathering has historically been a platform for significant announcements, such as the initiation of unprecedented monetary stimulus (Quantitative Easing) in the US in 2010, the start of stimulus removal in 2013, and the dismantling of monetary relief programs announced by Janet Yellen when she chaired the Fed.
In recent years, Powell has met these expectations. In the 2023 symposium, he warned that the inflation fight would have a temporary impact on households and businesses, pushing short-term yields higher.
A year ago, he acknowledged their willingness to lower rates that had reached two-decade highs.
Key Questions and Answers
- What is the Jackson Hole symposium? The annual Jackson Hole policy symposium is a gathering organized by the Federal Reserve Bank of Kansas City, where economists, market participants, academics, and central bankers discuss financial policy matters and global events over three days.
- Why is Jerome Powell’s speech significant? Powell’s final Jackson Hole speech marks the end of his seven-year tenure as Fed chair, making it a crucial event for market participants seeking signals about the future path of monetary policy.
- What are current economic indicators suggesting about rate cuts? Current data presents mixed signals, with inflation above the Fed’s target and unemployment slightly higher than in January. These factors technically make it difficult to expect a rate cut.
- What topics will be discussed at Jackson Hole 2025? The theme for Jackson Hole 2025 is “Transitioning Labor Markets: Demographics, Productivity, and Macroeconomic Policy,” with Christine Lagarde also speaking about European macroeconomic matters.
