It’s late August, which means we’re headed to Jackson Hole for the Kansas City Fed’s annual symposium, attended by top central bankers from around the world. And as usual, everyone is wondering in particular just what Fed Chair Jerome Powell — who’s expected to speak Friday morning — might have to say.
The US central bank just published minutes of its July policy meeting, and the record showed that, at the time, most Fed officials saw significant upside risk to inflation, which in turn may require even more tightening. On the other hand, two also favored holding rates steady, marking the first real hint of disagreement over the way forward that we’ve seen in quite some time.
Since that meeting, key data points have shown price and wage pressures continue to dissipate, which should bolster the case for an end to rate increases. But we’ve also seen ongoing strength in indicators of labor-market activity and consumer spending, which may keep policymakers uneasy about the prospects for ongoing easing of inflation.
Clarity on how Powell might be weighing those developments is a critical question. Beyond that, any clues about how the central bank might be thinking about a plan for rate cuts in 2024 will also garner a lot of attention. Otherwise, attendees will enjoy heady discussions about “Structural Shifts in the Global Economy,” the official theme of this year’s retreat.
“We expect Powell to strike a more balanced tone in Wyoming, hinting at the tightening cycle’s end while underscoring the need to hold interest rates higher for longer,” says Anna Wong, Stuart Paul and Eliza Winger.
Beyond Jackson Hole, the US economic data calendar is light and includes reports on previously owned home sales, new-home purchases and orders for durable goods.
European Central Bank President Christine Lagarde speaks in Jackson Hole on Friday — with everyone focused on potential hints on what might happen in September. In July she said that both another rate hike or a hold were possible. Economists are counting on the former, while markets are less convinced.
China cut its prime lending rates on Monday following last week’s surprise decision by the PBOC to trim borrowing costs on its medium-term lending facility. Lower interest rates may help Beijing support its economy, but doubts remain about their potential effectiveness without the use of wider stimulus measures as consumer spending slows, investment slides and unemployment climbs.
China’s central bank and the country’s financial and securities regulators urged a boosting of loans to support the economy and the cutting of local government bond risks, according to a statement Sunday.
