Powell takes center stage as September rate cut looms: MAGGIE PAGANO
The question now is no longer whether the US Federal Reserve will cut rates in September, but by how much.
Unless the August jobs numbers are dismal, most traders are confident the central bank will cut rates by 25 basis points when it meets next month.
The latest retail sales figures released yesterday showed that US consumers are doing well despite higher tariffs and that the US is not headed for a recession.
Combined with July’s inflation figures, which showed the lowest price increase in three years, the outlook is much brighter than a week ago, when stock markets were in full swing.
But if the next jobs report comes in worse than expected, suggesting the U.S. economy is trending in reverse, the cut could be a more aggressive 50-point measure in a shock-and-awe operation to jump-start the economy.
Time for a decision: US Federal Reserve Chairman Jerome Powell will deliver his traditional opening speech at the Jackson Hole Economic Symposium in Wyoming next Friday.
We’ll likely get a better sense of the mood when Fed Chairman Jerome Powell delivers his traditional opening remarks at the economic symposium in Jackson Hole, Wyoming, next Friday.
Markets around the world will be watching his speech with obsessive attention.
Traders want to know if Powell can deliver a soft landing, especially before the November election. That would be good news for Democrats.
In addition to giving their opinions on interest rates and practicing the famous fly fishing in Wyoming’s beautiful national park, the world’s most influential bankers also have to sing for their dinner.
They were asked by the host of the symposium, the Federal Reserve Bank of Kansas City, to discuss the title: ‘Reassessing the effectiveness and transmission of monetary policy.’
While that sounds terribly boring, it’s a loaded headline; more of a confession than a debate. Central bankers are being asked to explain why they’ve made such a mess of monetary policy, first by being excruciatingly slow to raise rates and now too slow to cut them.
As economist Mohamed El-Erian recently wrote, central bankers should ask themselves why their forecasts – about inflation or unemployment – are so completely wrong.
He also questions whether the Fed has enough self-confidence and humility to address two key issues: Does its policy contribute to “economic well-being or detract from it”?
In other words, shouldn’t the Fed put more emphasis on balancing the risks of damage to the real economy and jobs against the risk of reigniting inflation?
El-Erian offers a hint: He thinks the Fed is keeping quiet about its 2% target, effectively abandoning policy without him having to say so. Cute!
Powell will no doubt be asked if this is true. It is not just the fish in Jackson Hole that are getting nervous.
Just like buses…
First comes a surprise poll from Bank of America showing that the London Stock Exchange is Europe’s favourite bourse and that foreign investors plan to overweight UK shares.
Deutsche Bank says the FTSE 100’s outperformance compared to European peers is notable.
The analysts point out that British stocks have not only outperformed the EuroStoxx 50 by more than 10 percent, but volatility is also the lowest of all European indices.
Investors should overweight UK shares amid higher corporate profits, lower inflation and an economy set to grow this year, they say.
The latest GDP figures show excellent growth and the outlook is improving by the day.
Chancellor Rachel Reeves may have to eat her words.
On the coast are
Oh boy, WFH is so passé. Now we need to find a beach hut because WFB is the chic import from the West Coast.
That’s what former Chipotle Mexican Grill boss Brian Niccol is doing as the new boss of Starbucks.
As part of the £88million pay package – yes, that’s right – Niccol will work from his home in Newport Beach, California.
Starbucks will pay for the costs of a small office and fly him to Seattle on the Starbucks jet if needed.
The already exorbitant prices of coffee must be worth it. If not, it’s time to fill the bottles with the instant stuff.
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