Powell's Jackson Hole speech sets low bar for large cuts to ensure soft landing
Investing.com -- Federal Reserve Chair Jerome Powell delivered a dovish speech at the Jackson Hole Symposium on Friday, signaling that the central bank would be willing to deliver a larger rate cut to ensure a soft landing.
The Fed chairman's emphasis on maintaining labor market strength suggest "the Fed is open to 50s if incoming data suggests this may be required to get ahead of a deteriorating balance of risks on the employment side," Evercore ISI said in Friday note. Still, leaving the door open to larger cuts resembles a"macro-insurance, the Fed macro put, that is also indirectly market-friendly," it added.
While traders believe that a 25bps cut in September is most likely outcome, the odds of a larger 50bps cut increased to 36% from 28% the previous day, according to Investing.com'sPowell's comments endorsed the dovish bets on rate cuts seen in the market rate curve, which determines actual borrowing costs in the economy at different tenors, Evercore ISI added, and should"mitigate concerns" about the Fed taking too long to cut rates, or"being behind the curve.
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