Jackson Hole: 3 Major Reasons Why Fed Chair Powell Will Remain Hawkish This Week
The Federal Reserve may send financial markets a hawkish message when global central bankers meet at the Jackson Hole Economic Symposium this week.
The highlight is expected to take place when Fed Chair Jerome Powell delivers a highly anticipated speech on Friday morning in which he will talk on the outlook for monetary policy, the economy, and consumer prices.
In my view, Powell will strike a hawkish stance and hint that additional rate hikes will be needed to prevent a flare-up in inflation. I also believe the Fed chief will use his keynote speech to signal that rates will stay higher for longer and push back against the idea of rate cuts.
Indeed, the bond market appears to be preparing for a more hawkish monetary policy road ahead, as the U.S. benchmark 10-year Treasury yield climbed to a more than 15-year high of 4.366% on Tuesday last week.
Meanwhile, the year-to-date rally in the stock market has lost momentum, with the S&P 500 down 4.4% so far in August.
Traders of contracts tied to the Fed's policy rate now see a roughly 40% chance of another rate hike by the end of this year, up from about a 30% chance in the previous week.
Source: Investing.com
At the same time, hopes of seeing rate cuts by early next year have faded, with investors realizing that rates are not going to go back down as quickly as they thought.
The Fed has raised its benchmark interest rate at 11 of its last 12 policy meetings, lifting it by 525 basis points since March 2022 to the current 5.25%-5.50% range.
Here are the three primary reasons why the Fed will not stop tightening monetary policy anytime soon.
Powell's Jackson Hole speech will come after another strong batch of economic data showed consumer spending remained resilient in July,
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