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Powell speaks in Jackson Hole — What to know in markets Friday

Heidi Chung

All eyes will be on Federal Reserve Chairman Jerome Powell Friday morning 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, Chair Jerome Powell will push back on market expectations for another 100bp+ of rate cuts by end-2020, but we are not holding our breath,” Capital Economics predicted in a note on Wednesday.

Yahoo Finance's live coverage of Jackson Hole conference
Yahoo Finance's live coverage of Jackson Hole conference

Several economists are expecting little from Powell. “We don't think that the Fed will provide much new information on either front. Jackson Hole is an academic conference and not the appropriate forum to announce a change in policy,” TD Securities wrote in a note Friday. “The Committee is also divided on the outlook for rates and the impact of weak global growth and trade uncertainty on the US remains uncertain.”

UBS economists agree. “Given the July decision, when the cut was only 25bps and Powell seemed unable to lead the FOMC to a bigger cut, the risk of any speech disappointing market expectations for dovishness is high.”

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.”

Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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