Summary:
- August CPI data indicates ongoing softening, while the latest job report points to a cooling labor market.
- High wage gains pose a challenge for the Fed as they contemplate additional rate hikes.
- Fed Chair Jerome Powell's speech at Jackson Hole is anticipated to address structural dynamics affecting inflation and the economy.
- Rick Rieder suggests that the Fed might not provide a clear near-term rate trajectory but could discuss the potential for higher rates in the longer term.
- Factors like infrastructure spending and government borrowing could contribute to sustained higher rates.
- Despite signs of softening, there remains a shortage of labor in various job sectors.
- Rick Rieder believes the Fed is approaching the end of its current rate-hiking cycle.
- Rate hikes are affecting different segments of the economy, particularly the lower-income groups.
August CPI data showed a continuing softening while the latest jobs report signaled a cooling labor market. High wage gains could prove challenging for the Fed as they consider further rate hikes. What can we expect from Fed Chair Jerome Powell's speech at Jackson Hole?
Rick Rieder, BlackRock Global Fixed Income Chief Investment Officer, discusses the potential impact of Fed Chair Jay Powell's upcoming speech at Jackson Hole. Rieder anticipates that Powell might touch on structural dynamics influencing inflation and the economy, such as de-globalization and the influx of money into the system. While Rieder doesn't expect Powell to provide a near-term rate trajectory, he speculates on the possibility of higher rates in the longer term due to factors like infrastructure spending and government borrowing. The conversation also delves into the possibility of higher inflation and rates compared to the past decade.
Rieder concludes that while unemployment is showing signs of softening and slack is growing, there remains a shortage of labor in many sectors. He believes the Fed is nearing the end of its current rate-hiking cycle and should consider pausing. Rieder highlights the impact of rate hikes on different segments of the economy, especially the lower-income strata.