Federal Reserve Chairman Jerome Powell will deliver his highly-anticipated keynote address to the central bank's annual summit in Jackson Hole, Wyoming Friday as investors look for further signals on near-term rate hikes amid a surprisingly resilient U.S. economy.
Powell, who is slated to speak at 10:05 am Eastern time, is likely to reiterate the Fed's view that while inflation has fallen significantly from last year's peak of 9.1%, stubborn pockets of stickiness remain embedded in the world's biggest economy and could be re-ignited by rising wages in a tight labor market.
To that end, Powell is expected to suggest that while the Fed may be near the end of its rate hiking cycle, which has added more than 5% to the Fed Funds benchmark since March of last year, it isn't close to considering rate cuts and will likely keep borrowing costs elevate for an extended period of time.
"The FOMC’s official position is that further rate hikes “may” be necessary, but that it is now data-dependent and it will make decisions on a meeting-by-meeting basis," said Ian Shepherdson of Pantheon Macroeconomics. "We see no reason to think that Mr. Powell is ready now to give up that clear optionality, given the tendency of the inflation numbers in the past couple years to disappoint after appearing to improve."
Bets on a 2024 rate cut have fallen sharply over the past month, with traders only pricing in 100 basis points, or 1 percentage point, of reductions over the whole of next year, according to data from CME Group's FedWatch.
The chances of another rate hike between now and the end of the year, made during one of the Fed's final three meetings, is no better than 41.7% (pegged for the policy decision on Nov. 1).
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