Fed Chair Powell's speech 'firmly risk positive': Evercore

Federal Reserve Chairman Jerome Powell indicated a potential interest rate cut in the upcoming September meeting, a move that has been widely expected.

Powell's dovish tone at the press conference surpassed the cautious wording of the July Federal Open Market Committee (FOMC) statement, according to economists at Evercore ISI. This suggests that the central bank is closer to reducing rates.

"[H]is comments suggest the Fed is alert to risk of more severe weakening and we think it would react aggressively if it saw scary cracks emerging," they said.

During the presser, Powell discussed that some members of the Committee had already considered an immediate rate cut at the July meeting, although this was not the majority view.

He mentioned that recent data on inflation has boosted their confidence, and further positive data would only strengthen it.

Despite labor data showing signs of moderation, Powell stated that there isn't substantial evidence to support a significant weakening in the labor market.

Powell emphasized that while no decision for September has been finalized, the decision would be based on a range of data, rather than a single data point. He clarified that the Fed's decision would consider the totality of data, the economic outlook, and the balance of risks. 

"We continue to expect the Fed to cut in September and at each subsequent meeting to reach a terminal rate of 3.25-3.50% in 2025," Citi economists wrote.

Powell is expected to provide a more definitive signal at the Jackson Hole symposium at the end of August, after considering another month's worth of economic data.