The biggest development this week will undoubtedly be the speech by FED Chairman Jerome Powell at the Jackson Hole Symposium in the US state of Wyoming.
The focus of the symposium will be on the messages to be given by FED Chairman Powell. The speech, which is considered the most important and critical speech of the year, will start at 17:00 Turkey time.
Central Bank of the Republic of Turkey (CBRT) Governor Fatih Karahan will also attend the critical symposium.
What Will FED Chair Powell Say?
While it is almost certain in the market that the Fed will cut interest rates in September, experts say that the real question is no longer “whether the Fed will cut interest rates or not. The question is: Will they cut interest rates by 25 or 50 basis points in September?”
Experts said Powell avoided giving important details when looking at his past speeches in Jackson Hole, adding, “Powell will give a message in this speech that there will be a rate cut in September, but it is unlikely that he will be open about the amount of the rate cut.”
On this point, Bloomberg US Chief Economist Anna Wong said, “Powell is expected to emphasize in his speech that the rate hikes are having the desired results and that rates are restrictive enough.”
Powell will not give a clear signal on whether the first rate cut will be 25 basis points or 50 basis points, Wong said.
“As inflation falls and the labor market normalizes, it would be appropriate for the Fed to cut policy rates soon.
“At this point, we expect Powell to signal that a rate cut is imminent and specifically state that he is open to a 25 basis point or 50 basis point cut depending on the August employment report due on September 6.”
Chris Senyek of Wolfe Research said Powell will signal a rate cut starting in September, but he doesn't believe he will signal a rate cut of more than 25 basis points, which is what the market is pricing in.
Andrew Brenner from NatAlliance Securities also drew attention to the statements of the FED members and said, “The scenario is clear. The FED will ease in September, but no FED member currently shows a desire to ease by 50 basis points.”
British economist Ian Shepherdson said Powell would not leave the door open to a 50 basis point cut.
What Do FED Members Think?
While expectations in money markets are that the FED will make a total interest rate cut of 100 basis points by the end of the year, it is evaluated that Powell's statements today may cause fluctuations in the markets.
Kansas City FED President Jeff Schmid emphasized that inflation should be brought down to a sustainable level of 2 percent and said that more data should be followed for the reduction.
Boston Fed President Susan Collins said that there should be more confidence that inflation will return to 2 percent and that the time to lower interest rates is approaching. Collins stated that a gradual interest rate cut would be appropriate.
Philadelphia FED President Patrick Harker also said that if the data follows their expectations, a rate cut in September is possible. Harker emphasized the importance of focusing on a stable easing process rather than the extent of the rate cut.
According to CME FedWatch, the probability of a 25 basis point hike in September is priced at 73.5 percent, and the probability of a 50 basis point hike is priced at 26.5 percent.
*This is not investment advice.
