MUFG response to Friday’s Jackson Hole speech from Federal Reserve Chair Powell.
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Key Highlights:
1. Powell’s Neutral Stance: In his keynote address, Chair Powell largely reiterated the Federal Reserve’s recent policy views, emphasizing that upcoming decisions would be data-driven as they near the conclusion of the current hiking cycle. While Powell acknowledged the surprising resilience of the U.S. economy, he did not go as far as to confirm further rate hikes, only suggesting potential hikes if the stronger growth trajectory is maintained.
2. USD Near-Term Outlook: Given the Fed’s neutral stance, we anticipate the USD will continue to see gains in the near term. The lack of a significant deviation from the Fed’s recent policy message at Jackson Hole implies there are no immediate catalysts to curtail the dollar’s momentum.
3. September Rate Decision: Our expectations are for the Federal Reserve to keep rates steady in September, especially if we see further deceleration in inflation and employment growth. The current market consensus, which aligns with this hold decision for September, further cements our belief that the USD’s recent rally is unlikely to be thwarted soon.
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Earlier:
- Powell: We are prepared to raise rates further if appropriate, will proceed carefully
- A review of the speech from Fed Powell by topics
- Forexlive Americas FX news wrap 25 Aug: Powell/Fed prepared to raise rates but “carefully”
This article was written by Eamonn Sheridan at www.forexlive.com. Source