Instant insight: Powell “forceful” in fighting inflation at Jackson Hole

In our thorough Jackson Hole preview report, we outlined the case for more hawkish comments from Fed Chairman Powell in today’s highly-anticipated keynote speech.

In his relatively brief remarks, Mr. Powell clearly hit a hawkish note, emphasizing the importance of leaving policy tight until inflation was thoroughly licked. That said, he left the door open to a slowdown in rate hikes as soon as September, meaning economic data will be critical in tipping the Fed’s hand in the coming weeks.

Highlights from Powell’s speech follow:

SIZE OF SEPT. RATE HIKE HINGES ON ‘TOTALITY’ OF DATA
WILL LIKELY REQUIRE RESTRICTIVE POLICY FOR SOME TIME
HISTORY CAUTIONS AGAINST ‘PREMATURELY’ LOOSENING POLICY
THE LONGER THE CURRENT BOUT OF HIGH INFLATION CONTINUES, THE GREATER THE CHANCE THAT EXPECTATIONS OF HIGHER INFLATION WILL BECOME ENTRENCHED.
RESTORING PRICE STABILITY WILL TAKE SOME TIME AND REQUIRES USING TOOLS FORCEFULLY TO BRING DEMAND AND SUPPLY INTO BETTER BALANCE.
REDUCING INFLATION IS LIKELY TO REQUIRE A SUSTAINED PERIOD OF BELOW-TREND GROWTH. MOREOVER, THERE WILL VERY LIKELY BE SOME SOFTENING OF LABOR MARKET CONDITIONS.
HIGHER INTEREST RATES WILL BRING SOME PAIN TO HOUSEHOLDS AND BUSINESSES.
THE LONGER THE CURRENT BOUT OF HIGH INFLATION CONTINUES, THE GREATER THE CHANCE THAT EXPECTATIONS OF HIGHER INFLATION WILL BECOME ENTRENCHED.

Market reaction

On balance, markets are viewing Powell’s comments as more hawkish than anticipated. As we go to press, major US indices are trading down by 1-2%, 2-year Treasury bond yields are above 3.40% (near their highest levels in 15 years!), the US dollar is gaining ground against most of its major rivals, and commodities, including gold and oil, are trading lower on the day.

Traders will now turn their attention to next Friday’s NFP report as the next key economic release that the Fed will rely upon to help tip the scales between a 50bps and 75bps rate hike next month.

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.