Federal Reserve chairman Jerome Powell is scheduled to deliver a keynote speech at the annual Jackson Hole, Wyoming, gathering of global central bankers on Friday (Saturday AEST). Market analysts are keenly awaiting indications about the Federal Open Market Committee’s (FOMC) future monetary policy. Recent data has led to speculation about potential shifts in the Fed’s approach.
TD Securities anticipates that Powell may begin signalling a bias towards easing, noting growing downside risks to the labour market since the July FOMC meeting. They also observed that tariff pass-through has appeared more moderate than expected. The bank expects three rate cuts through the end of the year. However, TD Securities also acknowledges the risk that Powell might refrain from signalling a readiness to ease in September, choosing instead to await further clarity from upcoming employment and inflation reports.
According to TD Securities, a dovish lean from Powell is likely to increase the pricing for a September rate cut and the rest of 2025, potentially leading to a modest bull steepening of the US Treasury yield curve. The market’s expectation of a rate cut has seen some adjustment, with the probability of a cut falling to 80.9 per cent from 94.3 per cent a week ago, according to the CME’s FedWatch Tool. Investors will be scrutinising Powell’s address for any hints about the timing and extent of future policy adjustments.
