Is the rate cut in September real? What is the extent of the rate cut? Attention to the global markets and Chairman Powell's remarks [Jackson Hole Preview]

As concerns about an economic downturn loom over the world and central banks around the world reach a turning point in policy, the traditional Jackson Hole meeting is scheduled to be held this Friday.

Chairman Powell isJapan time, Friday, August 23rd, 11:00 pmScheduled to speak at the Jackson Hole Conference. The theme of the conference is,"Reassessing the Effectiveness and Transmission of Monetary Policy"is.

In recent years, the Jackson Hole Conference has become a barometer of the Federal Reserve's monetary policy. Therefore, the market is expected to focus on Chairman Powell's remarks at the Jackson Hole Conference. Market participants are expected to analyze Chairman Powell's views on the labor market and inflation as a basis for determining the direction of the US monetary policy.

Investors should be aware of the tendency for sudden volatility in the US stock market before and after Powell's speeches at the Jackson Hole Conference in recent years. For example, in 2022, Chairman Powell's speech plunged the US market into fear. In just 9 minutes, his speech led to a significant drop of 3-4% in the three major US stock indexes on the same day. In addition, the day before Powell's speech in 2023 (Thursday), the Dow recorded its largest decline in 5 months, and the Nasdaq also fell by nearly 2%.

On the other hand, from a long-term perspective, except for the two aforementioned meetings, the Jackson Hole Conference tends to have a positive impact on the US stock market. Since 1998, in the week following the FRB Chairman's speech at the Jackson Hole Conference, the S&P500 index has recorded a median increase of 0.6%, with increases recorded in 70% of the years.

September rate cut?
It is common in the market to expect a rate cut at the next meeting to be held by the FRB on September 17-18, but there are differing opinions on the extent of the rate cut. Most economists expect a 25bp rate cut, but some forecasters like Citi and J.P. Morgan are predicting a 50bp rate cut by the FRB.

This meeting provided Fed Chairman Powell with an opportunity to make the latest assessment of the trajectory of the US economy and the outlook for monetary policy between the July and September FOMC meetings. Chairman Powell is widely expected to provide clues on monetary policy in his opening speech at the annual meeting held in Jackson Hole.

According to economists, Chairman Powell is expected to lay the groundwork for a rate cut in September at the upcoming Jackson Hole meeting next week, but the actual extent of the rate cut will be determined by the August employment statistics scheduled for one week later.

Krishna Guha, Vice Chairman of Evercore ISI,stated that the rate cut tends to become 'active' rather than 'passive', and Chairman Powell will determine the tone of future monetary easing.Specific details will have to wait for the results of the August employment statistics to be released on September 6. The Federal Reserve Board (FRB) currently prioritizes employment data over inflation data, and it will be based on future employment data to determine how actively the Federal Reserve Board will promote rate cuts.

On the other hand, Bank of America noted that the FRB has repeatedly signaled its intention to update monetary policy at the Jackson Hole Central Bank Annual Symposium to the market and the public. However, this is a suitable occasion to discuss the long-term framework, similar to the period following the introduction of flexible average inflation targeting during the pandemic.

The bank believes that Powell's easiest course this time would be to outline the current economic situation, like he did at the July FOMC meeting. The evolution of the language in the July FOMC indicates that the FOMC is 'very close' or 'approaching' a turning point in easing. Chairman Powell, Whether to more strongly advocate the Federal Reserve's intention to avoid simply reacting to unexpected weakness in the labor market is a further signal for Cigna corp.There is a possibility of a 24% to 26% increase in revenue compared to the previous year in 2024.