Will Jerome Powell Hint at Major Rate Cuts This Friday?

As the Jackson Hole Economic Symposium approaches, all eyes are on Fed Chair Jerome Powell's upcoming speech.

Analysts at Evercore ISI predict that Powell will adopt a flexible stance regarding future interest rate cuts.

In their latest analysis, Evercore ISI suggests that Powell’s speech is likely to offer insights into the Federal Reserve’s potential approach to lowering rates. They anticipate that Powell will signal a readiness to implement significant rate reductions if economic conditions warrant such action.

The analysts foresee Powell reassuring the market by indicating that substantial cuts, potentially up to 50 basis points, could be on the table. However, they expect the Fed to primarily consider smaller, gradual cuts of 25 basis points. The criteria for making larger cuts are not expected to be very stringent.

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Evercore ISI also expects Powell to express optimism that inflation is gradually moving towards the Fed’s 2% target and to hint that rate cuts might begin as soon as September. However, a precise commitment to the size of the cuts is not anticipated.

Powell’s speech will likely concentrate on the progress made in managing inflation and adjusting the labor market. The decision on the magnitude of the initial rate cut will probably hinge on upcoming employment data.

Additionally, analysts expect Powell to characterize the Fed as adaptable and responsive to changing economic indicators, especially those related to the labor market.

Alexander Stefanov