China Finance News August 23 News (Editor Liu Rui) At 10 a.m. Eastern Time on August 23 (10 p.m. Peking time on August 23), Federal Reserve Chairman Powell will deliver a keynote speech at the Jackson Hole Symposium.

Goldman Sachs stated that despite investors' confidence in the prospect of rate cuts for the remainder of the year by the Federal Reserve, Powell may still bring unexpected news to investors. Goldman Sachs believes that compared to the scare Powell brought to the market two years ago, this time Powell is more likely to bring a pleasant surprise to the market.

Will Powell bring a surprise?

Since taking office as Federal Reserve Chairman in 2018, Powell's speeches at the Jackson Hole Symposium have been highly anticipated by the market every year. Among them, the speech in 2022 stands out as the most memorable.

At that time, U.S. inflation was at its highest level in nearly 40 years, and Powell delivered a short and direct 8-minute speech, which truly gave the market a significant "scare": Powell reinforced the Fed's commitment to aggressively raise interest rates to combat inflation and indicated determination not to waver in raising rates despite market volatility. After this strong hawkish speech, U.S. bond yields soared, and the S&P 500 Index fell by nearly 8% in a week.

But Goldman Sachs is optimistic that at this year's Jackson Hole Symposium, Powell is more likely to give the market a "surprise."

Goldman Sachs points out that current U.S. inflation is largely under control, while the labor market shows signs of deterioration. In this context, Powell's speech this year will take on a tone completely different from two years ago.

Goldman Sachs economist David Mericle said: "The dovish surprise that Powell may bring may include: he may express more concern about the job market, or hint that it is inappropriate to keep the federal funds rate high given the progress in inflation."

In addition, this Wednesday, the U.S. Department of Labor suddenly significantly revised down U.S. employment data, which will also shake the determination of the Federal Reserve to maintain a hawkish stance. The U.S. Department of Labor announced on Wednesday that the number of new jobs added in the U.S. from last year to early this year was far lower than previously reported. In the past 12 months leading up to March of this year, non-farm employment data was initially revised down by as much as 0.818 million people.

"This may mean that Powell will express more confidence in inflation prospects and emphasize more the downside risks to the job market," Mericle believes, "Powell may also reiterate that the Federal Open Market Committee is closely monitoring labor market data and stands ready to support the economy when necessary."

There is also a possibility of "surprises."

If Powell, as predicted by Goldman Sachs, makes a dovish statement, it is obviously bullish for the stock market, as it will strengthen market confidence, believing that the Fed will start cutting rates at the September FOMC meeting, and the rate cuts during the year may reach or even exceed market expectations.

CME's FedWatch tool shows that investors expect a probability of over 40% of a rate cut of 100 basis points by the end of this year by the Fed, and there is even a possibility of a rate cut of 125 basis points.

Of course, if Powell takes a more hawkish tone than investors expect, it may bring downside shocks to the market.

Mericle said, "One possible hawkish surprise is Powell stating that the overall financial conditions in the U.S. are still quite loose, which may imply that although high interest rates may not be necessary, it is not an urgent issue."

However, in Merrick's view, Powell is more likely to 'dovish' at the Jackson Hole Symposium, as the latest July non-farm payroll report showed weak performance, and recent data also indicate that the US inflation rate is falling, approaching the Federal Reserve's long-term target of 2%.