Key events
Powell’s speech could end up being “legacy defining” and, potentially, his last, according to some analysts, who expect the central bank may not be able to hold onto its leader much longer amid pressure from the Trump administration.
But some are also worried that his comments could end shatter expectations for a September rate cut.
Kevin Ford, FX & Macro Strategist at foreign exchange platform Convera says the conviction for a September cut is based on some shaky foundations, with the market odds of a September Fed cut having fallen from 95% to around 70% in two weeks
Ford says:
The problem is, the market’s conviction is built on some shaky foundations, and Powell’s speech could be the thunderbolt that shatters the calm.
The current atmosphere feels eerily similar to last year, with markets fixated on a September cut. But the underlying data is starkly different. In 2024, the Fed was facing a different beast: a rising unemployment rate and the specter of recession.
This year, after cutting 100 basis points, core inflation is still stubborn and the labor market, while showing some signs of cooling, isn’t screaming for emergency intervention. The economic context is simply not the same, yet the market is pricing in a cut with near-certainty.
This disconnect is what makes Powell’s speech a high-stakes event.
FTSE 100 dips on Friday open after third consecutive record close
The FTSE 100 dropped 0.2% at the start of trading, following its third consecutive record high on Thursday afternoon.
It appeared to reflect a mix of profit taking, as well as investors taking a bit of a breather ahead of Powell’s speech.
There was a mix of stocks at the bottom of the index, with property sales platform Rightmove, software firm Sage Group and wealth manager St James’s Place all down 1% at the market open.
Introduction: Asia shares edge higher as markets await key Jackson Hole speech by US Fed’s Powell
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Asian stocks have cautiously edged higher as global markets turn attention to a much-anticipated speech by US Fed chair Jerome Powell at the central bank’s annual symposium in Jackson Hole, Wyoming.
Powell will be addressing an audience of central bankers, academics and journalists gathered in the Rocky Mountains resort to discuss the finer points of monetary policy. They will be scouring the Fed chair’s speech for any hints about the policy outlook, which could help confirm expectations that a rate cut is on the cards.
This all comes while Powell continues to fend off threats from Trump, who has been calling for Powell’s removal, amid claims he has failed to cut rates fast enough to support Trump’s policy agenda.
Powell has repeatedly argued that the best approach for the Fed right now is to wait and see the impact of Trump’s aggressive tariff strategy before cutting rates.
As for what we can expect from the speech, Gabriele Foà, portfolio manager at Algebris Investments, says Powell is likely to stop short of shutting down expectations for a September rate cut:
Jackson Hole will mark a key opportunity for Fed Chair Powell to signal the policy outlook ahead of September.
Since tariffs were announced, the Fed has leaned toward the side of caution due to the potential impact on inflation.
However, July’s labour market data changed the picture, as large revisions to May and June’s data triggered concerns about the economy. As a result, the market is now fully pricing in a rate cut in September.
Chair Powell will need to use his Jackson Hole speech to balance inflation risks with signs of softer activity. July inflation data show some impact of tariffs on selected components, but not enough to outweigh recent macro weakness.
As such, we expect chair Powell to avoid pushing back against market expectations for a September cut, while remaining more cautious about future meetings.
In the hours ahead of Powell’s speech Asian stocks have edged higher, with the Hang Seng up 0.4%, the Shanghai Composite up 1.2%, and the Japan’s Nikkei 225 nearly flat but up marginally at 0.05%.
The Agenda
