A nervous global financial market will hope that Federal Reserve chair Jerome Powell’s Friday talk at the annual Jackson Hole conference hosted by the Kansas City Fed will add clarity after the Fed’s minutes of its July policy meeting that showed most Fed officials saw significant upside risk to inflation.
This week Fed presidents have set the table for Federal Reserve chair Jerome Powell’s Friday morning speech at the Jackson Hole central bankers’ conference. But it’s not clear that the financial markets are eating off the same menu.
The Federal Reserve will do everything it can to talk the financial markets out of optimism about future interest rate increases.
The difference of opinion isn’t focused on the September 21 meeting. The market has pretty much decided that the central bank will raise interest rates by either 50 basis points or 75 basis points at that meeting. (The odds on the CME FedWatch tool as of Friday, August 19, were 59% for a 50-basis-point increase, and 41% for a 75 basis-point move. It’s a question of what comes after the September, November, and December Fed meetings. The market seems to have decided that the Federal Reserve will end this cycle of interest rate increases shortly after those meetings. The Fed, in recent remarks, has been trying to convince the market that the fight against inflation is likely to take longer than that. And that the market should expect further interest rate increases into 2023. This week’s central bankers conference in Jackson Hole provides a pulpit for the Fed to preach its message. And I’d expect Fed chair Jerome Powell to use his 10 a.m. Friday speech to say that the Fed isn’t thinking that its inflation fighting work is near done.
With Federal Reserve chair Jerome Powell scheduled to give a talk at the (virtual) Jackson Hole central bankers’ gab fest on Friday morning, Treasury yields moved slightly higher today, August 25. The yield on the 10-year Treasury climbed 5 basis points to 1.35%. I don’t think I’d read much into this move.
Times listed are when I wrote the specific post (New York time.)
10:20 a.m.: The worst storm to hit the oil refineries on the Gulf Coast since Hurricane Wilma in 2005 is on a track to come ashore near Corpus Christi, Texas, on Friday. Hurricane Harvey with its 85 mile an hour winds and drenching rain is likely to disrupt gasoline production and curtail oil and natural gas demand. U.S. crude benchmark West Texas Intermediate closed down 1.63% today. Gasoline, on the other hand, rose 2.35% on anticipation that the storm will curtail supply. 10:40 a.m.: The usual reliable but unnamed sources have said that in September Apple (AAPL) will announce a new Apple TV set-top box that will include a faster processor capable of streaming higher-resolution 4K video. Apple is also said to be testing an updated version of its TV app that can aggregate programming from apps that already offer live streaming.
Today it’s Fed members at the annual Jackson Hole central bankers’ conference yelling “More compelling” and “Less compelling” at each other over the potential for an initial interest rate increase when the central bank’s Open Market Committee meets on September 17.
