The symposium of Jackson Hole, in Wyoming, the traditional late summer appointment with the central banks, which in many cases dictated the route of monetary policy, as in 2020, when Powell clearly reported the need to fully and amply fully and widely satisfied, introducing new cones of inflation and occupation and giving way to the accommodating phase of monetary policy as post-pandemia. On the same stage, in 2022, the number one of the Fed announced the “painful” restrictive turning point and the need to act quickly to combat inflation. Two examples of how important this opportunity is for monetary policy and for the trend of markets.
But this year the appointment is filling with new meanings, being the last time that the current president of the Fed presents himself on this stage, but above all being at risk the same independence as the Fed.
Spotlight on each hint to interest rates
The markets, which have been waiting for a cut of the rates for some time, will try to understand if the times are actually ripe for an intervention at the meeting of 16-17 September. In standing of an intervention there are the disappointing data of the labor market and an inflation that, albeit in slowing down, proved to be higher than expected and in any case still too high to break any delay.
The situation became more complicated with the duties policy launched by Trump, which entered into force largely in August. The effects of this policy on the dollar and inflation must still be seen and this represents an element of great uncertainty for monetary policy.
But monetary policy is not only made of data, although these exercise a greater attraction on Powell, but also of expectations. And these have become increasingly pressing. By now, operators expect an intervention in September with a 73%probability, which in some moments also reached 85%. Not only that, the markets serve at least two rates by the year.
Trump’s pressing and Toto succession
Expectations that press on the Fed also from the political arena. Needless to remember the pressures that President Trump has exercised on Powell, which on several occasions have also proved rather offensive. The “always too late” Powell, an appellation given by Trump himself at the number one of the Fed, has been the subject of repeated attacks in recent months, aimed at forcing him to bend to the will of politics, denying the independence of the central bank. A trap in which Powell did not fall, reiterating the importance of sticking to the numbers arriving from the economy.
Trump’s attacks did not limit themselves to rates decisions, but involved the leadership of the central bank, also in view of the expiry of the Powell mandate in May 2026. This was thus triggered the Toto succession, so much so that the same American president expressed some preferences about it. In the squad of candidates drawn up by the White House there would be about ten people, but according to what is anticipated by the secretary of Treasury Scott Beesent in recent days, the skimming should start around the Labor Day, which this year falls on September 1st.
Among the names leaked in the last period there are those of Kevin Hassett, former economic councilor of the White House, Kevin Warsh, former governor of the Fed, Michelle Bowman, one of the two “dissidents” of the last meeting, who voted against the maintenance of unchanged rates, and colleague Philip Jefferson, as well as other veterans and not.
The last week of the markets
The trend of the markets in the last week, indeed, in the last of the week, has appeared rather cautious, precisely in view of this important appointment, once the quarterly season was thrown behind. But what will happen in the coming months?
“Any lack of commitment towards a cut of rates in September could push the yields to the rise. At the same time, it is likely that the bond volatility increases and that the US dollar is appreciated. In addition to the fact that the bond market is serving a cut of the rates, the share markets do not foresee any significant volatility in the coming weeks, as illustrated by the structure at the end of the Vix”
Elliot Hentov, Head of Macro Policy Research of State Street Investment Management comments.
According to an analysis by Etoro, “2025 presents itself with an intermediate picture. The S&P 500 marks so far a +9.65%” and the “after” Jackson Hole has not always been the same, divided between positive performance and correction.
“If Powell will frame the slowdown of consumption and work only as a macro risk, without accompanying it with a credible monetary policy path, the markets could read it as a prelude to a more marked braking, with a” after “similar to that of seven years ago. If instead the same weakness will be transformed into justification to accelerate the cuts, the markets could reward it, but only if the Fed will show Real margins to do it.
Experts explain.
