On the eve of the highly anticipated Jackson Hole Global Central Bank Annual Conference, several Fed officials expressed their belief that the Fed should start the interest rate reduction process as soon as possible and that the pace of subsequent rate cuts should be gradual and orderly.

Boston Fed President Eric Rosengren recently used the dovish terms mentioned above frequently in media interviews, and Philadelphia Fed President Patrick Harker also used similar wording in interviews. However, both officials did not provide more detailed explanations of the meaning of these terms in terms of the frequency of cuts. Mary Daly, President of the San Francisco Fed, expressed support for the Fed's gradual pace of interest rate cuts, emphasizing that gradual does not mean weak, slow, or lagging behind - it simply represents a cautious stance.

Investors have been expecting the Fed to begin a rate-cutting cycle in September for several weeks, and the interest rate futures market has priced in almost 100% likelihood of a rate cut in September by the Fed. Investors have already started to shift their attention to what will happen after that. Currently, the interest rate futures market is betting that the Fed may cut a total of 75 or 100 basis points by the end of this year, with a higher probability of 75 basis points.

In a recent report, economists at Goldman Sachs stated, "Given the data released afterwards, we expect Powell to express stronger confidence in the inflation outlook than he did at the press conference after the Fed's FOMC meeting in July, and put even more emphasis on the downside risks to the labor market."

Goldman Sachs' interest rate expectations are largely in line with market expectations: cutting rates by 25 basis points at each of the next three meetings, followed by further policy easing in 2025, eventually lowering the federal funds rate by about 2 percentage points - a policy path that is expected to be proposed in a very general way by Powell at the Jackson Hole conference.

Fed official Rosengren stated in his speech that officials should proceed gradually when starting to ease, and emphasized that she has not seen any "major warning signs" in the economy. The Boston Fed President stated that she is committed to "maintaining a healthy labor market while the Fed continues to combat inflation rates".

"This is the background I believe the Federal Reserve will soon begin to relax monetary policy, and our focus will shift to the labor market," Collins told the media before the annual seminar held by the Kansas City Federal Reserve Bank in Great Tetons National Park.

Federal Reserve Chairman Powell said at the press conference after the last interest rate decision that now officials are more concerned about the other side of the dual mandate, which is to prevent undue damage to the US labor market as the inflation rate has dropped significantly from the peak of the epidemic. That is to say, the number of non-farm payrolls and the unemployment rate in the United States are currently the most important data that the Federal Reserve is concerned about, so the weak US labor market is undoubtedly driving the Federal Reserve to start an interest rate cut cycle in September, so in the view of some analysts, the Federal Reserve's interest rate cut in September is only one step away from the official announcement.

Hawk said, "In September, we need to start lowering interest rates." "But we need to start lowering them methodically." Hawk added that before deciding whether to cut interest rates by 25 basis points or 50 basis points next month, he wants to obtain more data information.

In contrast, the host of this event, Kansas City Fed President Jeffrey Shmiedt, said he was not yet ready to support a rate cut.

"To me, it makes sense to study some of the data that will be released in the next few weeks," he said in an interview. "Before we take action - at least before I support taking action or recommending taking action, I think we need to see more data."

Atlanta Fed President Stick, who has maintained a hawkish stance this year, recently stated that it is appropriate to cut interest rates as early as possible, and waiting too long for the Federal Reserve to cut rates "does bring risks", and personally, he is "open" to a rate cut in September.

San Francisco Fed President Daly said that recent economic data has given her "confidence" in controlling inflation. She emphasized that it is now time to consider lowering the benchmark interest rate from the current range of 5.25%-5.5%.

It is worth noting that the minutes of the Federal Reserve's policy meeting on July 30-31, released on Wednesday, showed that "several" Federal Reserve officials believed that the interest rate cut last month was reasonable, while the "vast majority" of Federal Reserve officials believed that it was appropriate to begin easing monetary policy at the next meeting on September 17-18.

The labor market is showing a "controlled cooling".

Three Federal Reserve officials recently stated that the initial revision of the annual non-farm employment figure by the Department of Labor until March 2024 did not change their positive view of the US economy. The US Bureau of Labor Statistics said on Wednesday that the preliminary revision of the number of new jobs added in the year ending in March in the US was down by 0.818 million, the largest downward revision in fifteen years.

Schmidt emphasized: "Although this is a seemingly large number, it does not really change my positive view of the US economy when I consider monetary policy."

Collins said that recent economic data shows that the overall economy is still in good shape. She stated that the inflation rate has dropped significantly, providing more confidence in the Fed's 2% inflation target.

Collins stated that despite the rising unemployment rate, reaching 4.3% in July, it is still relatively low historically, and labor force participation is high. Collins emphasized that while recruitment by businesses has slowed down, the scale of layoffs has not increased, indicating that the labor market is undergoing a controlled cooling rather than directly entering a slump period.

I do think it is becoming important to recalibrate monetary policy, but I hope the policy shift will be gradual and incremental," she added. "I don't think there's a preset path."

Federal Reserve officials have softened their stance one after another, and Powell is also expected to take a dovish stance at the Jackson Hole conference.

Investors will closely monitor the heavyweight speech by Federal Reserve Chairman Powell, which will be delivered at the Jackson Hole central bank annual conference on Friday, paying particular attention to Powell's expected pace and approach to interest rate cuts.

For the global stock market that experienced a "super rebound" last week, the Jackson Hole central bank annual meeting held on Friday night Beijing time was a "crucial test", where policy makers such as Fed Chairman Powell and Bank of England Governor Bailey will deliver important speeches. During Friday's trading session, the options market priced in the high volatility of the S&P 500 index exceeding 1% this Friday, betting that the benchmark index's volatility will exceed 1% whether it rises or falls.

"If traders hear a heavy signal that an interest rate cut is coming, the stock market will give a positive response," said Eric Bailey, executive director of Steward Partners Global Advisory. "However, if traders and investors don't hear the positive information they want, the stock market, which has experienced a big rebound, may face massive selling off."

It is understood that the Wall Street investment institution Evercore ISI, which predicts the benchmark index of U.S. stocks - the S&P 500 index is expected to rise to the 6000 point level by the end of the year, recently released another important forecast report. This institution expects that Federal Reserve Chairman Jerome Powell will indicate at the global central bank symposium in Jackson Hole this week that Fed policymakers are considering lowering the benchmark interest rate while also considering whether to cut interest rates by 50 basis points.

Evercore's judgment of Powell's speech at the Jackson Hole meeting appears to be more aggressive than the general expectations on Wall Street. Most Wall Street analysts expect Powell to at most reveal that the Fed is considering a rate cut, with possible vague wording on other aspects.

Many Wall Street investment institutions still predict that Powell may easily remain silent on the timing of rate cuts when he speaks on Friday, or may remain tight-lipped on the "timing of rate cuts" expected by the market, merely indicating that the Fed has taken rate cuts into consideration. In addition, in recent years at the central bank's annual meetings, Powell has often chosen to act as an enigmatic figure, adopting a cautious and ambiguous "enigmatic" attitude when revealing the possibility of interest rates during the Fed's rate hike cycle, which also suits his character.

Former New York Fed Chairman Bill Dudley said that Fed Chairman Powell may suggest that overly tight monetary policy is no longer needed. However, he expects Powell will not suggest the size and specific timeline of the first rate cut, especially since a crucial non-farm payroll and unemployment report will be released on September 6 to provide policy makers with a more comprehensive assessment before making their next policy decision on September 18. Product structure, 10-30 billion yuan products operating income of 401/1288/60 million yuan respectively.

Editor/ping