Fed's Powell may use Jackson Hole speech to shed light on rate cut timing

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QI Research CEO and chief strategist Danielle DiMartino Booth discusses how the Fed can get the U.S. economy back on track on 'The Big Money Show.'

All eyes will be on Federal Reserve Chair Jerome Powell when he delivers the keynote speech at the central bank's summer symposium in Jackson Hole, Wyoming, on Friday.

Powell is widely expected to use the speech to provide some hints about the timing of interest-rate cuts and where the Fed sees the economy headed over the next year.

«To us, the key will be Chair Powell’s tone, which we expect to lean dovish,» said Jack Janasiewicz, lead portfolio strategist at Natixis Investment Managers Solutions. «Simply put, inflation continues to trend towards the 2% target seemingly at a rate exceeding consensus. Combine this with signs that the labor market is softening and one gets the sense that there is little need to retain a hawkish stance.»

With inflation continuing to cool and unemployment rising, many investors think the central bank will soon pivot to lowering borrowing costs. The Labor Department reported last week that inflation rose 2.9% in July, the slowest pace since March 2021. 

INTEREST RATE CUTS ARE ON THE HORIZON, BUT HIGH MORTGAGE RATES COULD BE HERE TO STAY

Still, policymakers may not be ready to declare victory quite yet. Bank of America economists expect Powell to repeat his message from July, in which he said a rate cut is possible in September if price pressures continue to ease.

The Marriner S. Eccles Federal Reserve building in Washington, D.C., on June 25, 2024.  (Photographer: Ting Shen/Bloomberg via Getty Images / Getty Images)

«An evolution of the July FOMC language would suggest the committee is 'very close' or ‘close’ to the point where easing is