[TOPIC]Powell Speech On Friday- Market Up/Down?
The much anticipated Powell Speech at Jackson Hole annual meeting will begin at 10pm SGT (10am EST).
David Wessel from Brookings Institution said that:
It's interesting how this August speech of the Fed chair at Jackson Hole has become such an important platform for the Fed to influence market expectations about policy. It becomes a self-fulfilling prophecy
At last year's Jackson Hole annual meeting, Powell said:
a nascent surge in inflation was “likely to prove temporary. We see little evidence of wage increases that might threaten excessive inflation.
A year later, the US inflation is still the highest in nearly 40 years.
1. Analysts Expect Powell Speech To Be Hawkish
After a number of senior Fed officials have made hawkish statements since last week, the wall street generally expects a hawkish speech from Powell, except from Goldman Sachs.
In responding to market's expectations, the possibility of 75 bps rise:
1. Analyst from Facet Wealth commented that:
It is incredibly important that the Fed reestablish its price-stability reputation. They are going to stick with this hawkish rhetoric until they are 100% sure it is time for a pause.
2. UBS expects:
Officials will stick to a fairly hawkish policy stance, reiterating that the fight to curb inflation is not over. Powell may take the opportunity to provide more guidance on the path of interest rates.
3. Goldman Sachs analyst Hatzius said that:
I think he will lay out a case, as he did in his last press conference, for slowing the pace of increases.
I don’t think he will be specific about the number, but I do think he will be saying there is a risk of over-tightening, and therefore it makes sense to go a little bit more slowly than the outsized increases.
So based on the above analysis, the Powell speech is likely to revolve around three parts:
- US inflation is still high and the economy still has forward momentum
- The need for the Fed to further tighten monetary policy
- Reiterate the Fed's determination to fight inflation, never let up, unless you see evidence that inflation has come down significantly
2. Stocks Continue To Fall or Expect A Rebound After Speech?
Some analysts also believe that Powell's views may be more hawkish than the market expects, said Gregory Faranello, head of U.S. interest rate trading and strategy at AmeriVet Securities.
If Powell's speech is more hawkish, we could see another sell-off in the stock market.
Analysts at Standard Chartered, on the other hand, point out that
stocks have reason to rally after the annual meeting in Jackson Hole. If Powell is only slightly hawkish, there is a chance for a relief rally in the stock market.
What are your thoughts on the upcoming Jackson Hole meeting?
Do you think Powell will be hawkish or dovish at this meeting?
How does $S&P 500(.SPX)$ will move after the meeting?
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