Why the Jackson Hole Symposium is a Big Deal
This Friday, Federal Reserve Chair Jerome Powell will make a speech at the annual Jackson Hole Symposium. The focus is "Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy.”
The all-day event is a bigger deal than in previous years. President Trump demanded that the Fed Chair be replaced. He wanted a 300-basis-point cut, even though 25 bps – 50 bps would suffice. Still, any excessive rate cut overstimulates the economy. That would cause inflation. A weaker job market would lead to stagflation.
Investors are positioning for a rate cut. The longer-term treasury bill ETFs like the 7-10 Year (IEF) and 20+ Year (TLT) pulled back in the last week. Bank stocks like Wells Fargo (WFC), JPMorgan Chase (JPM), and Citigroup (C) are in a holding pattern. They could re-test recent highs if Powell hints that rates would fall sometime in 2025.
Powell might discuss a new Fed policy framework. That would influence central bank rate decisions in other countries. This week, central banks in Iceland and Sweden will announce their rate decisions.
Inflation is decidedly above the Fed’s 2% goal. The CME FedWatch tool, however, is predicting a 25-bps cut with an over 90% probability. July’s consumer price index (CPI) and producer price index (PPI) did not support a rate cut. Inflation rates are still too high.
Fortunately, tariffs did not lead to an increase in inflation rates.
