Are the interest rate cuts in September real? What is the range of interest rate cuts? Global Markets Pay Attention to Chairman Powell's Remarks [Jackson Hole Preview]

The annual Jackson Hole meeting is scheduled to be held this Friday as concerns about a recession have engulfed the world and central banks around the world have reached a turning point in policy.

Chairman PowellFriday, August 23 at 11:00 p.m. Japan timeI plan to give a lecture at the Jackson Hole conference from The theme of the meeting is“Reevaluating the Effectiveness of Monetary Policy and Transmission of Monetary Policy (Reevaluating the Effectiveness and Transmission of Monetary Policy)”It is.

In recent years, the Jackson Hole Conference has become a weather vane for the monetary policy of the US Federal Reserve (Fed). Therefore, the market will pay attention to Chairman Powell's remarks at the Jackson Hole meeting. Market participants are expected to analyze Chairman Powell's views on the labor market and inflation as materials to determine the direction of US monetary policy.

Investors should note that in recent years there has been a trend of rapid changes in the US stock market before and after Powell's speech at the Jackson Hole Conference. For example, in 2022, Chairman Powell's speech terrorized the US market. In just 9 minutes, the content of his speech directly hit a sharp decline of 3 to 4% on the same day in the three major US stock indices. Also, the day before Powell's 2023 speech (Thursday), the Dow recorded its biggest decline in the past 5 months, and the NASDAQ also fell close to 2%.

Meanwhile, from a long-term perspective, the Jackson Hole Conference, with the exception of the two meetings mentioned above, tends to have a positive impact on the US stock market. Since 1998, the week after the Federal Reserve Chairman's speech at the Jackson Hole Conference, the S&P 500 Index recorded a median increase of 0.6%, and recorded an increase of 70% per year.

September interest rate cut?
There is a general view in the market that the Fed will cut interest rates at the next meeting to be held on 9/17-18, but opinions are divided about the extent of interest rate cuts. Most economists predict interest rate cuts of 25 bp, but some forecasters, such as City and JPMorgan, anticipate that the Fed will cut interest rates by 50 bp.

This meeting provided Chairman Powell with an opportunity to make the latest evaluations on the trajectory of the US economy and the outlook for monetary policy during the Federal Reserve policy meetings in July and September. There is a strong view that Chairman Powell shows clues to monetary policy in his opening speech at the annual meeting to be held in Jackson Hole.

According to economists, Chairman Powell will lay the groundwork for September interest rate cuts at the Jackson Hole meeting next week, but the actual rate cut will be determined by August employment statistics scheduled one week after that.

Who is Krishna Guha, vice chairman of Evercore ISIAssuming that interest rate cuts tend to be “active” rather than “passive,” Chairman Powell will decide the tone for future monetary easingI said it. For specific details, we will have to wait for the results of the August employment statistics to be announced on 9/6. The Federal Reserve (Fed) currently prioritizes employment data over inflation data, and it is said that future employment data will determine how the Federal Reserve (Fed) will actively promote interest rate cuts.

Meanwhile, Bank of America stated that the Federal Reserve has repeatedly shown the market and the public its intention to update monetary policy at the Jackson Hole Central Bank Annual Meeting. Nonetheless, this is an appropriate place to discuss long-term frameworks, such as during the COVID-19 period when the Fed introduced flexible average inflation targets.

The bank believes that the easiest thing Powell can do this time is to outline today's economic situation, as he did at the FOMC in July. Changes in the FOMC wording in July suggest that the FOMC is “very close” or “close” to a transition point of mitigation. Chairman Powell saidA further signal is whether they will insist more strongly on the Fed's intention to avoid “unexpected weakness” rather than simply reacting when it occurs in the labor marketThere is a possibility that it will