Jerome Powell expected to give clues about Fed rate path in Jackson Hole speech

• Fed Chair Jerome Powell is due to speak on monetary policy at the Jackson Hole Symposium.

• All eyes remain on Powell’s speech for fresh insights into the US interest-rate outlook.

• The US Dollar is set to rock with Powell’s speech influencing market pricing of Fed policy outlook.

US Federal Reserve (Fed) Chair Jerome Powell is scheduled to deliver a speech on “Economic Outlook and Framework Review” at the annual Jackson Hole Economic Symposium on Friday at 14:00 GMT.  

Market participants will closely scrutinize Powell’s speech for any fresh hints on the trajectory of monetary policy, particularly about the timing of the Fed’s first interest-rate cut of the year and the potential scope and timing of subsequent rate reductions. 

His words are expected to stir markets, injecting intense volatility around the US Dollar (USD), as the world’s most powerful central bank looks to steer toward a policy-easing path as early as September.  

In the July policy meeting, the Fed left the federal funds rate unchanged in the range of 4.25%-4.50%, but two policymakers dissented, with Fed Governor Christopher Waller and Fed Governor Michelle Bowman voting in favor of a 25 basis points (bps) rate cut. In a statement published a few days after the July meeting, Governor Waller explained that he dissented because he saw tariffs as a one-time price event that policymakers should “look through” as long as inflation expectations remain anchored. Governor Bowman argued that slowing growth and a less dynamic labor market make it appropriate to begin gradually moving the moderately restrictive policy stance toward a neutral setting.

The US employment data for July, however, revived concerns over worsening conditions in the labor market and fed into expectations of an interest rate cut in September. Nonfarm Payrolls (NFP) in the US rose by 73,000 in July, while NFP increases for May and June were revised down by 125,000 and 133,000, respectively. On the other hand, the latest Consumer Price Index (CPI) and Producer Price Index (PPI) data from the US hinted at sticky inflation, casting doubt about the number of rate cuts the Fed could opt for in 2025.

Against this backdrop, the US Dollar (USD) faces a two-way risk in the run-up to the highly anticipated Jackson Hole showdown.