U.S. Desk Strategy Market Views

Powell at Jackson Hole: Aiming for balance…

But cementing a higher for longer Fed Funds Rate (until something breaks)…

We believe Chair Powell was aiming for a balanced message, and in our view, he largely achieved such an outcome. That said, some markets acted as if he had delivered a neutral-to-slightly hawkish speech at Jackson Hole.

In many ways Chair Powell’s speech started out very hawkish, with inflation still their main focus, got a bit dovish towards the middle, but then ended hawkish, when he stated that they still may hike in the future if needed.

The big takeaways were that 2% is unequivocally their inflation target, there is a lot of uncertainty around what the neutral rate for the economy is at this point, and overall interest rates are poised to stay higher for longer.