With Fed rate cut set, Powell may focus on explaining US economic conditions at Jackson Hole
Repeats 0707 GMT story, no change to text
Fed expected to cut rates at September meeting
Powell telegraphed policy easing in July remarks
Jackson Hole speech begins at 10 a.m. EDT (1400 GMT)
By Howard Schneider
JACKSON HOLE, Wyoming, Aug 23 (Reuters) -U.S. economic data is giving the Federal Reservethe green light to cut interest rates, financial markets are aligned for the first move, and the central bank all but gave the game away on Wednesday when a readout of its July meeting showed a "vast majority" of policymakers agreed the policy easing likely would begin next month.
With all that in place, Fed Chair Jerome Powell's goal in his keynote speech on Friday to the Kansas City Fed's annual Jackson Hole research conference may be less about further shaping expectations and more about assessing where the economy stands ahead of what he has called a "consequential" first step.
"I don't think he needs to do a lot beyond the press conference in July," said Richard Clarida, a former Fed vice chair who is now global economic adviser for Pimco, referring to how Powell leaned strongly toward a rate cut at the Sept. 17-18meeting in remarks to reporters after the July 30-31 meeting.
"You will not get 'mission accomplished,'" Clarida said, "but he might look back at the last two years, where we were and where we are, and acknowledge that they are close" to taming the worst outbreak of inflation in 40 years.
Powell will take the podium at 10 a.m. EDT (1400 GMT) in a remote lodge in Wyoming's Grand Teton National Parkto address a gathering that has become a global platform for central bank officials to shape views of monetary policy and the economy.
With one exception, the six speeches Powell has delivered to the conference since becoming Fed chief in 2018 have been largely explanatory, designed less to influence short-term policy expectations than to lay out how officials were thinking about major structural issues or, since the start of the COVID-19 pandemic, detailing the mechanics of inflation.
The exception was in 2022 as the Fed fought to keep public expectations about high inflation in check: Powell delivered a terse, market-moving address meant to convey his seriousness about defending the central bank's2% inflation target. Some called it his "Volcker moment," a reference to Paul Volcker, the Fed chief who triggered a recession in the early 1980swith punishing interest rates to break an inflationary cycle.
REACTION FUNCTION
That's a consequence the Powell Fed has dodged - so far. Inflation crested at levels not seen since the Volcker eraand two years later is roughly half a percentage point above target. The unemployment rate, at 4.3%, is well below its 5.7% long-run average. And financial markets seem in sync with where the Fed is heading.
In light of that, former Fed staff, policymakers and outside analysts said Powell may well revert to his explanatory norm, perhaps sketching out in broad terms how the central bank will approach its coming easing cycle or delving into lessons learned over two years about inflation's causes and cures.
The conference theme - how monetary policy impacts the economy - would fit either.
William English, a former head of the Fed's monetary affairs division who is now a professor at the Yale School of Management, said he felt the moment called for a general outline about the approach to cutting rates.
Because Fed policymakers at next month's meeting will update their interest rate projections for this year and 2025, Powell won't want to provide detailed forward guidance about what's to come - a risk in itself for the possible market reaction it could trigger, or the possibility coming data could push in a different direction.
Powell instead could provide some background for the public and markets to understand how the Fed will respond as the economy evolves, English said. "Let'ssay the economy does not go as we expect. What would that mean for policy? ... What is it going to take to move faster or slower?"
THE OTHER MANDATE
Powell and other Fed officials have become fans of describing different economic scenarios, a strategy that allows them to provide a baseline outlook, but also convey uncertainty around what might happen and how different outcomes might cause them to react.
Some, for example, have begun to worry the economy is at a point where the unemployment rate could rise fast and far enough to derail the "soft-landing" from inflation that they thought was within reach.
Yet it is unclear how the Fed, at this point, thinks about "maximum employment" - one of its two goals alongside stable inflation - and the degree to which officials are willing to tolerate rising joblessness to wring another one quarter or one half of a percentage point from inflation.
Antulio Bomfim, a former special adviserto Powell and now the head of global macro forNorthern Trust Asset Management's fixed-income team, agreed that the Fed chief will likely steer clear of short-term guidance in favor of a discussion about broader issues - perhaps trying to capture what the central bank has just lived through and how coming labor and inflation dynamics may differ from those before the pandemic.
"We're kind of at an inflection point for policy, potentially for the economy too ... Inflection points are very difficult to navigate," Bomfim said.
Open questions linger about the economy that's emerging, including whether inflation will prove a more persistent headache for central banks after years of running soft before the pandemic, and whether job market dynamics have shifted and may imply higher unemployment rates than the Fed thought it could achieve based on the economy's pre-COVID-19 performance.
With inflation being such a high priority "over the past couple of years, the Federal Reserve ... was behaving like a single mandate central bank," Bomfim said. "And now we are not just in the transition from hikes to cuts, but also transitioning back to what I would call a more normal state of affairs."
Graphic-Stocks on Powell's Jackson Hole speech days https://reut.rs/3AssQE1
Graphic-The path to a rate cut https://reut.rs/3WLOpqz
Reporting by Howard Schneider;
Editing by Dan Burns and Paul Simao
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إخلاء المسؤولية: تتيح كيانات XM Group خدمة تنفيذية فقط والدخول إلى منصة تداولنا عبر الإنترنت، مما يسمح للشخص بمشاهدة و/أو استخدام المحتوى المتاح على موقع الويب أو عن طريقه، وهذا المحتوى لا يراد به التغيير أو التوسع عن ذلك. يخضع هذا الدخول والاستخدام دائماً لما يلي: (1) الشروط والأحكام؛ (2) تحذيرات المخاطر؛ (3) إخلاء المسؤولية الكامل. لذلك يُقدم هذا المحتوى على أنه ليس أكثر من معلومات عامة. تحديداً، يرجى الانتباه إلى أن المحتوى المتاح على منصة تداولنا عبر الإنترنت ليس طلباً أو عرضاً لدخول أي معاملات في الأسواق المالية. التداول في أي سوق مالي به مخاطرة عالية برأس مالك.
جميع المواد المنشورة على منصة تداولنا مخصصة للأغراض التعليمية/المعلوماتية فقط ولا تحتوي - ولا ينبغي اعتبار أنها تحتوي - على نصائح أو توصيات مالية أو ضريبية أو تجارية، أو سجلاً لأسعار تداولنا، أو عرضاً أو طلباً لأي معاملة في أي صكوك مالية أو عروض ترويجية مالية لا داعي لها.
أي محتوى تابع للغير بالإضافة إلى المحتوى الذي أعدته XM، مثل الآراء، والأخبار، والأبحاث، والتحليلات والأسعار وغيرها من المعلومات أو روابط مواقع تابعة للغير وواردة في هذا الموقع تُقدم لك "كما هي"، كتعليق عام على السوق ولا تعتبر نصيحة استثمارية. يجب ألا يُفسر أي محتوى على أنه بحث استثماري، وأن تلاحظ وتقبل أن المحتوى غير مُعدٍ وفقاً للمتطلبات القانونية المصممة لتعزيز استقلالية البحث الاستثماري، وبالتالي، فهو بمثابة تواصل تسويقي بموجب القوانين واللوائح ذات الصلة. فضلاً تأكد من أنك قد قرأت وفهمت الإخطار بالبحوث الاستثمارية غير المستقلة والتحذير من مخاطر المعلومات السابقة، والذي يمكنك الاطلاع عليه هنا.
