As anticipation builds for Fed Chair Jerome Powell's speech at the Jackson Hole Economic Symposium, Evercore ISI analysts predict Powell will take a flexible approach to potential rate cuts.
Evercore ISI analysts said in a recent note that Powell’s speech Friday morning will provide insight into the Fed’s strategy for lowering interest rates. They expect Powell to convey that the central bank is prepared to implement significant reductions if the economic situation warrants it.
Analysts expect Powell to reassure markets by saying the Fed is open to larger cuts of up to 50 basis points if necessary, although the base case calls for gradual cuts of 25 basis points. The firm stressed that the threshold for such aggressive cuts is not particularly high.
Evercore ISI predicts Powell will express confidence that the inflation rate is trending back toward the Fed’s 2% target and signal that rate cuts could begin as early as September. However, they note that Powell is unlikely to commit to a specific size of the rate cut at this stage.
Instead, Powell is expected to say that the decision on whether the first move will be a 25 basis point or 50 basis point cut will depend on incoming labor market data. Powell’s speech will likely focus on progress in managing inflation and rebalancing the labor market, and will lay the groundwork for potential rate cuts, Evercore said.
Analysts also expect Powell to describe the Fed as “flexible and agile” and ready to adjust policy based on evolving economic indicators. Powell is expected to emphasize that the pace and magnitude of rate cuts will be affected by new data, particularly from the employment sector.
*This is not investment advice.