What will D-St investors look for in Fed Chair's Jackson Hole speech on Friday?

NEW DELHI: About 120 central bankers, economists and academicians, among others, will gather in US Fed's 45th annual Jackson Hole economic policy symposium in Wyoming, US. Anticipations of an hawkish Fed commentary has kept equity markets globally on the tenterhooks so far, with the dollar index roaring past 109 and US 10-year bond yields climbing 3 per cent mark, ahead of the first in-person conference, after two years of virtual meets.

While the focus of the symposium will be on “Reassessing Constraints on the Economy and Policy” and will run from 25-27 August, Fed Chair Jerome Powell will deliver a speech on the economic outlook on Friday, 26 August at 10 am ET.

For Indian investors, the key things to watch out would be whether the Fed would sound more hawkish. They will keenly follow any hints of a slowdown in the pace of rate upcycle. Eyes would be on comments on the growth versus inflation debate, hard or soft landing of the US economy and the timeline for the rate cuts.

"The topic of this year’s symposium could provide an opportunity to highlight supply constraints – both on the real economy and labor markets – and constraints on policy such as elevated inflation, which may drive policymakers to focus more on one side of their mandate over the near term (i.e., bringing inflation lower at the expense of labor market strength)," Nomura said this week.

Nomura noted that the minutes of the July FOMC meeting suggest the Fed has started to acknowledge the risk of overtightening in order to restore price stability, indicating a subtle shift towards both inflation and growth sensitivity.

However, subsequent Fedspeak from Daly, George, Bullard, Kashkari and Barkin continued to focus primarily on the need to reduce elevated inflation through a series of additional rate increases and holding rates at a restrictive level for some time, the foregn brokerage said.

"It is hard to be aggressive with any positioning until we hear from Powell on Friday. A slower global growth environment is not going away anytime soon and now we are clearly seeing broader signs of weakness for the US economy," said Edward Moya, Senior Market Analyst, The Americas OANDA.

Moya said the Fed still has a lot of tightening to do and that won’t change during the winter. Powell’s fight against inflation might send the US economy into a recession late next year, but for now he needs to stick to the hawkish script and leave all options of tightening on the table, Moya said, adding that "what Powell needs to do is signal that rates will probably stay higher than what markets are thinking."

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)