On Powell at Jackson Hole

The title of Powell’s speech was changed at the last minute to emphasize “progress” on inflation, but the bulk of the speech was about how there has been too little progress. This is basically a boilerplate holding statement containing no new information. As of this writing markets are upping their cumulative implied probability of a hike by the November FOMC to 65%, for the first time above 50-50. And the full implied probability of a cut has been pushed out to July 2024. This is probably the reaction Powell wants, thinking he can help conquer inflation, through the expectations channel somehow, by keep markets afraid. But in the meantime, the “progress” Powell is nevertheless acknowledging is real, and is about to turn into evidence of downright deflation. We’ve seen the last rate hike. The first cut should come in the first quarter of next year.