“The difficulty he will have is there’s already quite an expectation that he’s going to be quite hawkish, so he has to be at least quite hawkish for that rally not to happen,” said Page.
The message from last year’s Jackson Hole symposium was completely different. Powell was still characterizing inflation as “transitory” and Fed expectations for rate hikes were much lower.
“It was a lower for longer policy stance,” said Michael Gapen, chief U.S. economist at Bank of America. “Compared to that, this is going to sound super hawkish.” But the environment has changed dramatically since then, too, as inflation showed itself to be persistent rather than passing. Consumer inflation topped out at 9.1% in June, and it may have just peaked — months after the Fed had first expected.
“I think that will be the message – we’re going to slow down at some point. We’re tightening, but don’t expect a quick shift to cuts,” said Gapen.
Powell said after the July Fed meeting that the central bank could downsize the rate cuts at some point, but he did not mention reversing them, Gapen said.
