Powell Approves September Rate Cut, According to Reuters

Federal Reserve Chair Jerome Powell indicated on Friday that the U.S. central bank is ready to lower interest rates, citing increasing risks to the job market and a notable approach towards the Fed’s inflation target of 2%. Powell’s remarks came during a significant speech at the Kansas City Fed’s annual economic conference in Jackson Hole, Wyoming, where he suggested that the timing and extent of any rate cuts will depend on forthcoming data and the evolving economic landscape.

Powell stated, "The upside risks to inflation have diminished, while the downside risks to employment have increased. The time has come for policy to adjust." His comments reflect a change in stance, signaling a likely move toward easing monetary policy in the near future.

Following Powell’s announcement, stock markets reacted positively, extending gains by 0.92%. Meanwhile, the yield on the benchmark U.S. 10-year notes declined to 3.812%.

Market analysts weighed in on Powell’s speech:

UTO SHINOHARA, MANAGING DIRECTOR AND SENIOR INVESTMENT STRATEGIST, MESIROW, CHICAGO:
Shinohara noted that Powell’s remarks validated market expectations for a rate cut in September and emphasized the Fed’s commitment to data dependency regarding future policy changes. He indicated that while the dollar is under pressure due to anticipated rate cuts, implied expectations for the cuts have not shifted significantly.

STEVE ENGLANDER, HEAD OF GLOBAL FX RESEARCH, STANDARD CHARTERED BANK:
Englander described the market’s response as appropriate, acknowledging that while Powell suggested potential easing, there was no explicit timeline provided. He warned against quick assumptions about the scale of cuts, suggesting that 50-basis-point cuts might not occur immediately.

DAVID DOYLE, HEAD OF ECONOMICS, MACQUARIE GROUP:
Doyle remarked that Powell has set the stage for cuts in September, indicating that future easing will depend significantly on labor market data.

SAM STOVALL, CHIEF INVESTMENT STRATEGIST, CFRA RESEARCH:
Stovall expressed surprise at Powell’s clear acknowledgment of improving inflation and the resilience of the job market. He interpreted Powell’s articulate hints about future cuts as an indication that the Fed is proactive rather than reactive.

ELIAS HADDAD, SENIOR MARKETS STRATEGIST, BROWN BROTHERS HARRIMAN:
Haddad pointed to Powell’s dovish tone stemming from concerns about the labor market, suggesting a conducive environment for equity market rallies, contingent upon upcoming employment figures.

ANDRE BAKHOS, MANAGING MEMBER, INGENIUM ANALYTICS:
Bakhos mentioned the potential for a significant 50-basis-point cut, depending on the health of labor market metrics, while maintaining a positive long-term outlook on stocks.

GLEN SMITH, CHIEF INVESTMENT OFFICER, GDS WEALTH MANAGEMENT:
Smith concluded that a 25-basis-point cut in September seems highly probable, and forecasted uncertainty around the potential for further cuts depending on future economic data.

KARL SCHAMOTTA, CHIEF MARKET STRATEGIST, CORPAY:
Schamotta underscored the Fed’s intention to support the labor market while moving toward price stability, hinting at a need for multiple rate cuts in the upcoming months.

WASIF LATIF, PRESIDENT, SARMAYA PARTNERS:
Latif noted a market rally reflecting renewed optimism following Powell’s statements, asserting that the anticipation around rate cuts has finally been addressed.

PAUL CHRISTOPHER, HEAD OF GLOBAL STRATEGY, WELLS FARGO INVESTMENT INSTITUTE:
Christopher remarked that while the Fed is set to cut rates, the pace will remain measured, reflecting a cautiously optimistic view on the labor market.

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES:
Cardillo suggested that Powell’s comments imply a potential for a 50-basis-point cut in response to labor market shifts, stressing the dovish nature of the message.

MARC CHANDLER, CHIEF MARKET STRATEGIST, BANNOCKBURN GLOBAL FOREX:
Chandler expressed skepticism regarding the longevity of the market’s initial positive reaction to Powell’s speech, suggesting a lack of urgency for aggressive rate cuts.

KIM FORREST, CHIEF INVESTMENT OFFICER, BOKEH CAPITAL PARTNERS:
Forrest remarked that the Fed is moving towards a more accommodative stance, which the markets are responding to positively, indicating a consensus that cuts are forthcoming.

In summary, Powell’s message has set the groundwork for potential interest rate adjustments, and a consensus appears to be forming that the Fed may soon implement cuts while keeping a close eye on labor market conditions.