Fed Chairman Powell comes to this year’s meeting of central bankers in Jackson Hole, WY, wedged between discord within the FOMC over appropriate monetary policy and mounting market pressure for more interest rate cuts.
In navigating that gap, Chairman Powell is unlikely to use his Keynote speech Friday at the Kansas City Fed’s annual economic symposium to go off much from the message he sent last month after the Fed cut rates for the 1st time in 10 years. That the move was a “mid-cycle adjustment” and not the start of a rate-cutting cycle.
He will likely nod to the possibility that trade tensions, which have escalated since the 30-31 July policy meeting, may worsen a global economic slowdown and ultimately make more US rate cuts necessary.
He is expected also to try to ensure he is not seen as bowing before attacks from President Trump for not easing policy further, or caving to a bond market where investors appear to be heavily betting the policy-setting FOMC will end up doing so.
“We cannot rule out this year’s Jackson Hole being another fundamental shift in policy as it has been in years past,” UBS economists wrote in a note earlier this week. “But more likely, Powell will give another speech on risk management to try to lean Dovish without committing to bold actions that the committee may not ratify.”
Chairman Powell’s colleagues inside the Fed are nowhere near a broad consensus on how to proceed.
The Fed Chairman gathered a majority among the current voting policymakers to back last month’s rate cut, but the mins of the meeting released Wednesday showed a wider gap inside the broader committee than was reflected in the decision.
Caught between these moving parts, Chairman Powell may stand still, and surprise no one.
But, if he does cuts rates as President Trump demands, that will ease pressure on the stock market, which the President may take as giving him a stronger hand in his trade dispute with China,