Powell’s Jackson Hole Speech Signals Imminent Rate Cuts as Markets Rally

All eyes are on this week's Jackson Hole Symposium, with the theme "Reassessing Monetary Policy's Effectiveness and Transmission." Federal Reserve Chairman Jerome Powell is set to speak at 10 PM Beijing time on August 23, addressing the U.S. economic outlook. Powell’s remarks follow last year's brief but impactful speech emphasizing prolonged tight monetary policy, triggering a market selloff. This year, Powell is expected to focus on regaining control over market rate-cut expectations, summarizing the policy responses to the pandemic and resulting inflation, and preparing for the 2025 monetary policy review.

Powell might stress that the Fed is not committed to a specific rate cut in September and will be data-dependent, acknowledging the dual risks the Fed faces. He’s also likely to reiterate the balance between inflation and employment goals.

In financial markets, U.S. stocks closed higher on Friday, with the Dow Jones Industrial Average rising over 460 points as Powell suggested imminent rate cuts. Analysts interpreted Powell's comments as his strongest signal yet for easing monetary policy. The Dow gained 462.30 points, up 1.14% to 41,175.08; the Nasdaq added 258.44 points, a 1.47% increase to 17,877.79; and the S&P 500 was up 63.97 points, or 1.15%, to 5,634.61. All three major U.S. indices posted gains for the week.

Powell stated, "The time for a policy adjustment has come. We are more confident in inflation moving towards 2%. We do not seek or welcome further softening in the labor market." He emphasized the Fed's commitment to supporting the labor market while achieving price stability, noting that rate levels leave ample room to counter risks, including further weakness in the job market.

Market analysts highlighted Powell’s shift, noting his stance has become notably dovish. The market now prices a 73.5% chance of a 25 basis point cut in September and 26.5% for 50 basis points, according to CME's FedWatch Tool. Economist surveys indicate the labor market’s cooling could push the Fed to cut rates faster and more aggressively.

Apple, set to unveil the iPhone 16 series, the latest Apple Watch, and new AirPods on September 10, adds to an already packed financial news week. This information, reported by Mark Gurman, expects iPhone pre-orders to begin on September 20, accompanied by new OS updates. Despite no official announcement yet, insider sources suggest media invitations could be sent out as early as next week.