Summary:
- Traders focus on Powell's tone at Jackson Hole amidst an 80% probability of a rate pause.
- Economists anticipate minimal signaling due to the time gap to the next meeting but emphasize the significance of Powell's tone.
- Inflation decrease prompts debate on whether Powell will assert 'mission accomplished,' while core inflation remains relatively high.
- Jackson Hole discussions extend to ECB's Lagarde and the ongoing global conversation on countering inflation.
- Determining the adequacy of action against inflation and the potential impact of Powell's speech on the inflection point are subjects of ongoing analysis.
Traders focus on Powell's tone in Jackson Hole as an 80% chance of a rate pause is priced in by traders. The upcoming meeting is 26 days away, leading to anticipation of Powell's remarks.
Economists suggest Powell may not provide significant signals due to the time gap until the next meeting, considering upcoming jobs and inflation reports. However, his tone holds immense importance as observers look for signs of economic pain prediction or optimism. Last year, Powell's stance was hawkish, but with inflation's decline, his tone's shift is under scrutiny.
There's debate on whether Powell will declare 'mission accomplished' on inflation. Despite CPI inflation's decrease from 9.1% to 3.2%, core inflation (excluding volatile food and fuel prices) remains high at 4.7%. The Fed aims to restore a 2% steady run rate for inflation, suggesting ongoing work.
The conversations at Jackson Hole extend beyond Powell's speech. ECB's Lagarde's remarks on global inflation response and signals for further action are anticipated. Additionally, economists discuss determining when sufficient action has been taken to counter inflation, a conversation echoed worldwide.
The potential inflection point represented by Powell's speech raises questions about the Fed's future rate actions. Economic indicators, inflation and jobs reports, and subsequent meetings in the year contribute to the uncertainty.