Central Bank Watch Overview:
- Fed policymakers have been pushing back against the notion that the rate hike cycle is finished.
- If Fed Chair Powell takes a similar path during his speech on Friday at the Jackson Hole Economic Policy Symposium, it might help curb the ‘Fed pivot’ narrative that’s evolved in recent weeks.
- Rates markets see a 55% chance of a 75-bps rate hike in September.
Rate Hikes are Still Coming
In this edition of Central Bank Watch, we’ll review comments and speeches made by various Federal Reserve policymakers since the July FOMC[1] meeting. Fed policymakers have been pushing back against the notion that the rate hike cycle is finished, which isn’t much of a surprise considering financial conditions have loosened and US equity markets have rallied in recent weeks.
For more information on central banks, please visit the DailyFX Central Bank Release Calendar.[2]
50-bps or 75-bps in September?
The tone deployed by Fed policymakers between the July FOMC meeting and the Jackson Hole Economic Policy Symposium suggests that a 75-bps rate hike is possible in September, even after Fed Chair Jerome Powell suggested that rate hikes to such a degree were less likely moving forward. But having abandoned forward guidance to embrace a data dependent stance, it may be the case that the August US inflation report (CPI) and the August US nonfarm payrolls report in September, ahead of the monthly FOMC meeting, will be the most important factors for the next tightening move.
July 27 – The FOMC raises rates by 75-bps for the second consecutive month. Cumulatively, the June and July rate hikes (totaling 150-bps) are the most since the Volcker era. The FOMC abandons forward guidance, with Fed Chair Powell signaling that future rate increases will be done on a
