Fed’s Powell’s Jackson Hole speech finally came and unlike last year when the speech was short and sweet and to the point, there was little bit of something for everyone :

Regarding monetary policy and rate decisions:

• Prepared to raise rates further if deemed necessary.
• The next move will be based on data.
• The Federal Reserve will proceed ‘carefully’ when deciding to hike rates again or maintain them.
• There’s uncertainty in the economy, necessitating ‘agile’ monetary policy-making.

On economic observations:

• Inflation remains higher than desired.
• Two months of positive data are just the beginning; more is needed to gain confidence in the inflation trajectory.
• The current policy is restrictive, but the neutral rate level is uncertain.
• The Federal Reserve remains committed to a 2% inflation target.
• A decrease in inflation might also require a softer labor market.
• Signs of the job market not cooling could lead to more actions from the Federal Reserve.
• There’s evidence that inflation is becoming more responsive to labor market conditions.

Unique Economic Dynamics:

• Supply and demand dislocations in this cycle have unique effects on inflation and labor market dynamics.
• Job openings have decreased without a corresponding rise in unemployment, indicating a significant demand for labor.
• Inflation appears to be more sensitive to labor market conditions than in recent decades.

Conclusion and Outlook:

• The Federal Reserve is navigating uncertain economic conditions.
• Risk-management is crucial given the current uncertainties.
• Decisions in upcoming meetings will be based on a comprehensive assessment of data, outlook, and risks.
• The primary goal is to restore price stability, which is essential for achieving the dual mandate of strong labor market conditions and stable prices.
• The Federal Reserve is committed to continuing its efforts until the objectives are met.

Other Fed members who spoke today included Fed Harker:

• Doubt that rate cuts are on the table until next year at some point
• Reiterated his feeling that he does not see the need for more rate hikes now

Feds Goolsbee also spoke today and typically a dove, but his comments were a little bit more hedging :

• Still confident about reaching the golden path of a soft landing
• He thinks there is a long way to go on inflation
• 3% inflation was lower but largely due to energy which can move back higher as well
• We have not seen consumer spending deteriorate like you normally see given the rising yields
• He is patient about getting to a 2% target

Market Reaction:

The market’s initial reaction was a slight dip in the dollar, possibly due to the ‘carefully’ comment, which might be perceived as dovish. The dollar than reversed to the upside, only later to come off the high levels, but still closed higher.

For a September hike the odds remain around 20% but for a November hike the odds move back above the 50% level.