Stock index futures are up ahead of Federal Reserve Chair Powell’s speech at the Kansas City Federal Reserve’s Jackson Hole Economic Symposium, scheduled for 9:00 Central Time. Powell is anticipated to indicate support for reducing interest rates at the September meeting.
Fed Chair Powell’s statement:
It’s time to adjust our policies. We don’t want to see more cooling in the job market. We will do everything we can to keep the job market strong while we continue to work on stabilizing prices.
Our current policy rates give us enough flexibility to handle risks, including if the job market weakens further. The timing and speed of any rate cuts will depend on future data and the balance of risks.
I am more confident that inflation is moving steadily back to our 2% target. Risks of inflation going up have decreased, but there are now more risks to jobs. The balance of risks between inflation and employment has changed.
Inflation has dropped significantly and is now much closer to our goal. The job market cooling is clear and is no longer too hot. We’ve made good progress towards price stability while keeping unemployment from rising sharply.
Update
U.S. short-term interest rate futures have increased, with traders boosting their bets on a possible rate cut by the Fed following Chair Powell’s remarks.
Traders now see about a one-in-three chance of a half-point rate cut in September, up from before Powell’s speech.
U.S. Treasury yields continued to drop after Powell’s speech. The 10-year yield was last down by 4.4 basis points at 3.816%.
The two-year Treasury yield turned negative after Powell’s comments, last down by 4.2 basis points at 3.963%.
The yield curve between the two-year and ten-year Treasury notes narrowed its inversion after Powell’s speech, moving from -17.6 basis points just before to -15.2 basis points.
S&P 500 increased by 1.5% after Fed Chair Powell stated that “the time has come” for rate cuts.
The index is now officially up more than 10% from its low on August 5th.
The market has recovered more than $4.5 trillion in market capitalization within just three weeks.
Key Highlight
Jerome Powell said it’s time for a policy shift, expressing increased confidence that inflation will hit 2%. He observed a slowdown in the job market and stated that any interest rate cuts will depend on economic data and risks.
