The Time Has Come
Jackson Hole take-a-ways:
– Powell dovish comments “the time has come for policy to adjust” whereby it is a near certainty that the Fed will cut in September, likely 25bp rate as I have expected
– Other Fed Committee members agree based upon their recent comments
– Powell is focused more on employment, less on inflation: “The upside risks to inflation have diminished; the downside risks to employment have increased.”
– Powell said “ we will do everything we can to support a strong labor market as we make further progress toward price stability”
– Powell stated, “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks”
– With GDP +2%-plus and inflation on a clear path towards 2%, there is a low likelihood of recession at this juncture, expect 25bp cut, not 50bps
– The question is: what’s the Fed Funds neutral rate, how many 25 bps cuts until Fed take an extended pause?
Markets are fully pricing in 25bp in September, 3 cuts in 2024. Employment report on September 6th will be all the focus since Powell told us today, he does not want to see further weakening in employment |
