Fed minutes show support for rate cut

⚡POWELL'S JACKSON HOLE SPEECH TO SUPPORT SEQUENCE OF 25BP CUTS

Fed Chair Powell will "express a bit more confidence in the inflation outlook" in his Jackson Hole speech, while putting "a bit more emphasis on downside risks in the labor market" than he did in the July Q&A,…

— *Walter Bloomberg (@DeItaone) August 20, 2024

The Federal Reserve released the minutes of the Federal Open Market Committee meeting that took place on July 30-31, 2024. The minutes provide insights into the economic and financial conditions discussed by the Committee, based on information available at the time of the meeting. The minutes for each regularly scheduled meeting of the Committee are generally published three weeks after the policy decision.

As central bankers prepare to meet in Jackson Hole, concerns about the health of the US labor market have supplanted fears about inflation. On the Fed's radar are regions like the Lehigh Valley, where things have cooled but no major cracks have emerged yet https://t.co/wf0xSf6Dq6 pic.twitter.com/S2v28U7qW9

— Colby Smith (@colbyLsmith) August 21, 2024

In a recent release of the Federal Reserve minutes, there is growing confidence among policymakers in support of a rate cut scheduled for September. This decision follows the recent Federal Open Market Committee meeting in July, where a “vast majority” of the committee members expressed their backing for the rate cut, contingent upon continued alignment of economic data with expectations. Federal Reserve Chair Jerome Powell is set to deliver his keynote address at the Jackson Hole Economic Symposium in Wyoming on August 25, 2023. The eagerly anticipated speech comes amid mounting concerns that the US labor market is weakening.

At Jackson Hole, Fed faces pivotal test on unemployment https://t.co/FdfeCpPeP7 via @Reuters

— Jennifer Ablan (@jennablan) August 19, 2024

The Jackson Hole Economic Symposium, an annual invite-only summit hosted by the Kansas City Federal Reserve, gathers top economists from around the globe. Over the next three days, these experts will discuss critical economic issues, with reporters and investors closely monitoring for insights into the economic outlook. Powell’s speech on Friday at 10 am ET is particularly significant for its timing.

Most US Federal Reserve officials signalled readiness to cut interest rates in September https://t.co/MWzKz1zQlq via @ft

— Demetri (@Dimi) August 22, 2024

The US unemployment rate recently hit its highest level since October 2021, and employers added just 114,000 new workers in July—the second-lowest monthly gain since December 2020. These disappointing figures have sparked fears of a potential recession. The Bureau of Labor Statistics’ annual review suggests there were 818,000 fewer jobs in March of this year than initially reported, heightening concerns about a cooling labor market and inflation remaining above the Fed’s 2% target.

Fed members discuss potential rate cut

As a result, a growing share of investors believe the Fed might opt for a half-point rate cut next month rather than the usual quarter-point. Last year, Powell’s remarks at the Jackson Hole symposium were interpreted as a signal that the Fed was done hiking rates. However, subsequent economic data and Powell’s emphasis on combating inflation suggest otherwise. His 2022 keynote underscored the Fed’s commitment to tackling inflation, even if it meant causing some economic pain. This stance led to notable market declines and two subsequent three-quarter-point rate hikes. Powell is not the only Fed Chair to use Jackson Hole to hint at policy changes. In 2010, Ben Bernanke signaled further easing of financial conditions post-Great Recession, and in 2016, Janet Yellen indicated a readiness for rate hikes. Economists expect Powell’s address to adopt a dovish tone—favoring lower interest rates to stimulate the economy amidst signs of labor market weakness. Citigroup economists suggest that mere mention of the significant downward payroll data revisions could hint at a half-point cut in September. Meanwhile, Goldman Sachs anticipates Powell expressing confidence in the inflation outlook, which might solidify the case for a September rate cut without committing to its size. Alongside Powell, other key Fed officials, including Kansas City Fed President Jeffrey Schmid and Atlanta’s Raphael Bostic, will be present at Jackson Hole. Their impromptu media interactions could offer additional insights into the economic outlook. As the financial world awaits Powell’s speech, it is clear that the data released and the Fed’s subsequent decisions will have profound implications for the US economy.