Dovish risk into Jackson Hole event is that Powell suggests a 50bps rate cut: Citi
Federal Reserve Chair Jerome Powell is scheduled to speak at 10 AM on Friday at the Jackson Hole Symposium, where he is expected to hint at a widely anticipated rate cut at the September FOMC meeting. This follows last week’s core CPI data, which recorded a 0.165% month-over-month increase, marking the third consecutive reading at or below a 2% annualized rate.
Citi projects 50bp rate cuts in both September and November but expects Powell to avoid committing to specific policy decisions, reiterating that these are “data dependent.” First, he might argue that as inflation decreases, the real policy rate – the nominal rate adjusted for inflation – effectively rises, necessitating a reduction in nominal rates to avoid overly restrictive monetary conditions.
They believe Powell may use his Jackson Hole speech to reinforce the idea that policy is “well positioned” to respond to evolving data, possibly signaling that there is considerable scope to lower rates.
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