The “Davos for Central Bankers” Jackson Hole is a settlement in one of the least populated states in Wyoming, US. But do you know these places hold great significance in the world’s economy? This is because every year a conference “Jackson Hole Economic Symposium” is conducted at this place. Here, the biggest global bankers, economists, and policymakers of the financial market meet, discuss, and suggest changes in economic issues. This year it is taking place from 22nd August to 24th August. And 23rd August is being marketed as one of the most important dates for the global economy.
What is Jackson Hole Economic Symposium?
Jackson Hole is an Economic Symposium, an annual conference that is hosted by the US Federal Reserve Bank of Kansas City in Jackson Hole, Wyoming, United States. This event has an important role in monitoring and determining the global economy. It serves as a point of mutual discussion, resolution, and improvement in the global economy.
Every year it is conducted with a different agenda and theme and this year it has a theme that is the need of the hour. It is “Reassessing the Effectiveness and Transmission of Monetary Policy”.
Why August 23rd Can Be A Big Day?
US Fed Chair Jerome Powell’s 2022 Jackson Hill Economic Symposium statement is well known to have led to a big sell-off. And this year his speech is scheduled on 23rd August 2024. The people and financial experts around the world are waiting for his suggestions. Powell and his predecessors have long used the Jackson Hill Economic Symposium to suggest changes in economic policies, give strategies to fight US recession and inflation, and eventually affect the global finance market. Some experts predict that he will suggest a 25 bps cut in September considering the latest economic indicators such as US economy news, and global markets
How Fast and How Far Fed Could Cut Rates?
The Federation Open Market Committee (FOMC) that was conducted on 30-31 July along with the Jackson Hole Economic Symposium is going to affect the market. According to Financial Express, the minutes of FOMC will be released on August 21st at 2:00 pm. Moreover, the US Federal Reserve intends to start cutting the benchmark interest rates soon from its 23-year high mark. This will be the first time Fed Chair Powell is considering cutting rates in case inflation continues to fall. Inflation touched its 2-year lowest mark of 2.9% in July. And now it is cooling towards its 2% target.
Another factor that may lead to a rate cut will be the high unemployment rate. However, this will only be determined by looking at whether employees keep hiring or not. Some experts expect 0.25% while others suggest a 0.50% interest cut. The low Fed interest rates will mean lower rates on any form of borrowing from auto loans to mortgages.
Economists View n Fed Cut
There is a general agreement among the economists that the Fed is conquering high inflation and soon he will declare “mission accomplished.” This has led millions of households to suffer from Financial pain starting from the pandemic recession, three years ago. According to Economic Time, the below-given experts are posing their stance on the coming event in the global economy:
1. Tom Porcelli
Tom Porcelli, a chief economist at PGIM Fixed Income from U.S. said “At this point, it’s right that the Fed is now more focused on labor versus inflation. Their policy is calibrated for inflation that is much higher than this.”
However, the speed and the degree of rate cut will depend on the economic data of the coming months. The unemployment rate touched 3 3-year highest mark of 4.3% and the month of July has experienced very little hiring. Moreover, the stock prices were bearish for two days as the U.S. recession was much expected. A few economists are expecting a 0.50% rate cut in September along with another similar cut in November
Furthermore, some healthier economic reports have presented strong gain trends in retail sales. With this, Wall Street traders are speculating three quarter-point cuts. Moreover, this is already bringing down the Mortgage rates
2. Raphael Bostic
The slowdown in hiring will strengthen the expectation of a half-point Fed rate cut in September. However, this will only be evident on September 6th as on this date the next jobs report will be issued.
The president of the Fed’s Atlanta branch, Raphael Bostic, in an interview with The Associated Press, said that “evidence of accelerating weakness in labor markets may warrant a more rapid move, either in terms of the increments of movement or the speed at which we try to get back.”
Bostic noted economy changed in the last couple of months and a rate cut may not be necessary until October. He added,
“Our policies are getting tighter with every moment in that type of situation… We have to be concerned”.
However, he mentioned that as of now there is a healthy trend in the job market. And he expects a “soft landing” with US inflation forecast. As inflation will head back to the 2% target without a recession hit.
3. Matthew Luzzetti
The chief U.S. economist at Deutsche Bank, Matthew Luzzetti said on an unclear “it will be difficult for Powell to pre-commit to a particular trajectory at Jackson Hole.”
Stock Market Update
Ahead of the FOMC minutes release and this anticipation the US stock market witnessed mixed sentiments. At 09.51 Dow Jones Industrial Average dropped 46.91 points and Nasdaq Composite peaked at 15.43 points. The lows and highs continued and during the opening bell, Dow Jones again dropped to 22.0 points. While the Nasdaq Composite also fell 27.7 points.
The Bottom Line:
There is uncertainty in the air with one side expecting a 0.25% cut in the Fed interest rate while the other section of economists expecting a half-point cut. However all this will become clear with minutes of FOMC, Powell’s speed on 23rd August at Jackson Hole Symposium and what future data has to offer.
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