The time has come
These are words the market likely wanted but hadn’t expected to be uttered by the Fed Chair Jay Powell last week. Speaking at Jackson Hole, the Chair adopted the more typical candid tone that the symposium has been known to foster. He suggested that the direction of adjustment was obvious leaving only the scale and pace of adjustment up for debate. Despite being the most unequivocal statement we have heard from the Fed Chair in some time, it does remain consistent with what we have seen taking place within the FOMC.
The endorsements of the Chair’s messages over the weekend suggest his words are, as we would expect, reflective of the position of the wider committee. Consistent with the latest set of Fed minutes, the Chair also suggested that no decision nor even debate had yet been made over the extent of easing to follow either in September or for the rest of the year. This continues to leave the door open for a heavily data-dependent approach to interest rate adjustment. With so much placed in the hands of data once again, here are the key dates to look out for:
The September Fed decision is due for publication on 18th of next month. Prior to that the most salient data items we have concern the Fed’s two mandates: employment and inflation. Regarding the latter we first have the Fed’s preferred measure of inflation due out on 30th July. The market is relatively confident on how this will look given recent PPI and CPI readings. As we enter September, the jobs report and payrolls data will be due on Friday 6th. Whilst other significant elements, including survey data, will remain important to markets, it will be these heavy weight data sets that likely determine the course for the Fed.
Discussion and Analysis by Charles Porter
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