We Are Navigating by the Stars Under Cloudy Skies – Jerome Powell

Insights from Chairman Powell’s Jackson Hole Speech

“As is often the case, we are navigating by the stars under cloudy skies. At upcoming meetings, we will assess our progress based on the totality of the data and the evolving outlook and risks. Based on this assessment, we will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data.”

Market participants focused on every statement as they listened to Chairman Powell’s speech at the central bank’s summer symposium at Jackson Hole Wyoming today. They wanted to gain more insight into two primary components of the Fed’s monetary policy going forward. First, will the Federal Reserve enact any more rate hikes this year? Secondly, what is the path forward in terms of a timeline to begin to cut rates?

As to the current path of the Federal Reserve Chairman Powell was resolute in achieving their current mandate – to take inflation to its 2% target. However, Powell’s speech classically avoided a direct response to those questions by focusing on how the Federal Reserve will be data-dependent, saying that the Federal Reserve could raise its benchmark interest rate if inflation veers from its current downward path.

He shied away from answering whether the Fed will raise rates by ¼% one last time this year, or if the Fed will pivot from its current monetary tightening campaign, the question investors were hoping to get answers on the most. Also, when could we expect to see a pivot employing a rate cut was left ambiguous. Powell gave no definitive timeline for the end of QT (Quantitative tightening).

Powell’s speech did not have the shock and awe effect of last year’s speech at Jackson Hole where his underlying message was “pain” that would be felt by American consumers. In that way, there has been obvious progress over the last year. But how close we are to seeing the hampering effect of a high cost of borrowing dwindle was left up in the air, or the cloudy skies as J. Powell would say.

As of 5:55 PM EDT, gold futures basis the most active December contract is down $3.80, or – 0.20%, and fixed at $1943.30. Silver futures are up 0.23% or $0.055 taking the most active contract month to $24.285. Lastly, the dollar had gains of 0.22% taking the index to 104.15.

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Wishing you as always good trading,

Gary S. Wagner