26 Aug 2024

BREAKING - Jackson Hole - it seems the Fed Pivot is here

Here's a summary of Fed chair Powell's remarks (8/23/24): 1. "The time has come for Fed policy to adjust" 2. Fed "will do everything" to support a strong labor market 3. Fed does not welcome further weakening of the labor market 4. Confidence has grown that inflation is heading to 2% 5. Balance of risks to Fed mandates has changed 6. Inflation has declined significantly toward the goal As mentioned by Nick Timiraos, the Powell pivot is complete: “The cooling in labor market conditions is unmistakable.” “It seems unlikely that the labor market will be a source of elevated inflationary pressures anytime soon.” “We do not seek or welcome further cooling in labor market conditions.” “The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.” “We will do everything we can to support a strong labor market as we make further progress toward price stability.” equities, bonds, cryptos, gold, etc. are all rallying post-statement. Bottom-line: Fed Chair Powell validates rate cuts soon, but didn't make any promises on size and extent. We believe that moving away from a restrictive monetary policy, to a more neutral stance, makes sense. We continue to believe the first fed funds rate cut will be -25bp in September.

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