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It's not a matter of if . It's a matter of how much.
That's the thinking around interest-rate cuts heading into the Fed's annual summer symposium kicking off today in Jackson Hole, Wyoming. The event includes Friday's highly anticipated speech from Fed Chair Jerome Powell.
Rate cuts are a lock for the Fed's next meeting in September. But there's still plenty of intrigue. Instead of wondering if they'll come, experts are focused on how deep they'll go , writes Business Insider's Ayelet Sheffey.
According to CME's FedWatch tool, which tracks the probability of the Fed's decision, a standard quarter-point cut is the odds-on favorite. But the chance of a larger cut of 50 basis points has gained steam throughout the week, with the tool giving it about a 31% chance.
New data from the Bureau of Labor Statistics released Wednesday only muddied the waters. The report indicated job growth from April 2023 through March 2024 was worse than previously reported, with a downward revision of more than 800,000 jobs .
It's the largest downward revision in over a decade (bad), but it's also not entirely unexpected (good). Experts were predicting a drop as big as a million jobs .
It's another example of the gray area the economy has existed in for the past year, bouncing between fears of a full-blown recession to belief in the possibility of a soft landing.
Kevin Dietsch/Getty, Tyler Le/BI
That's why Powell's keynote address at 10 a.m. EDT will draw the most interest.
The speech has a history of being a big one for Powell , writes BI's Huileng Tan. Two years ago he made clear the Fed was taking a hawkish approach to get the economy in shape, a promise he certainly made good on.
Claudia Sahm, the creator of the recession indicator that sent the market into a tizzy , recently analyzed Powell's previous Jackson Hole speeches . What she found was Powell's fondness for citing lessons from previous monetary policies, which isn't always helpful considering how unique the current economy is.
Still, Powell's unlikely to tip his hand too much lest he send the market skyrocketing or into a tailspin. He hasn't wavered on his mission of bringing inflation down. Even in the face of failing banks, a looming presidential election, and a mini-meltdown earlier this month, he's avoided knee-jerk reactions.
Instead, the speech will likely offer some vague clues about the Fed's future plans that are enough to pique interest but fall short of guarantees. Talk of continuing to monitor the data, a go-to Powellism over the past year, will likely make an appearance.
In short, expect just enough hedging to keep the market on its leash until September.
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