On Powell at Jackson Hole
https://trendmacro.com/system/files/reports/20240822trendmacroluskin-df.pdf
Friday, August 23, 2024
Rate cut expectations were deep before he even started talking. Then they got deeper.
Federal Reserve
US Macro
Powell didn’t disappoint. Affirming what was already obvious from the July FOMC and its minutes, he said “The time has come for policy to adjust.” He said nothing to affirm the rapid and deep rate cut expectations embedded in markets, but reassured that he does not welcome any further weakening in labor markets, and will act if it nevertheless happens. So to the extent that market expectations for the funds rate are in fact a recession forecast, he has pledged to deploy a “Powell put.” Rate cut expectations have deepened from already aggressive levels as of this writing. He was silent on the recession-free terminal rate in this easing cycle, in light of his evolving awareness that the neutral rate must be higher than previously thought. Our call is no recession. So we call for a 25 bp cut in September, and another at each FOMC meeting until 4% is attained in May.