Wall Street is fixated on Powell's speech in Jackson Hole this week after his 'Volcker Moment' there 2 years ago

• Central bankers are gathering in Jackson Hole, Wyoming for the Fed's annual meeting.
• Investors are focusing on Fed chair Jerome Powell's keynote for hints on potential rate cuts.
• There are expectations of a Fed rate cut soon after July data showed cooling inflation and rising unemployment.

Top central bank policymakers are descending upon Jackson Hole, Wyoming for the US Federal Reserve's annual summer symposium this Thursday to Saturday.

The event is like the World Economic Forum in Davos, Switzerland — but for the world's top central banking wonks — so markets will be looking for cues on policy direction and themes for the rest of this year and beyond.

Specifically, investors will scrutinize Fed chair Jerome Powell for any hints of a rate cut. He is expected to deliver the symposium's keynote address at 10 a.m. EDT on Friday.

After all, Powell did, as Bank of America analysts wrote in a Thursday note, make news with his "Volcker Moment" during the Jackson Hole Symposium in 2022. At the time, Powell invoked former Fed Chair Paul Volcker, who hiked rates massively in the late 1970s to contain high inflation.

Powell's hawkish tone at Jackson Hole in 2022 underscored the Fed's rate-hike cycle that had already started.

This year, analysts are waiting for Powell's next big signal for a rate cut.

"This is likely to be used as a platform to confirm that the Federal Reserve now thinks monetary policy is too restrictive and that they can start to lower interest rates," wrote James Knightley, the chief international economist at ING, in a Friday note.

"Inflation is looking better behaved, and this is allowing them to put more emphasis on the jobs market, which is showing signs of cooling quite quickly," wrote Knightley.

Market expectations are rising for rate cut from the Fed after the US inflation rate rose 2.9% in the year ending in July, cooling from 3.0% in June. However, it's still well above the Fed's 2% target.

Meanwhile, the US unemployment rate rose from 4.1% in June to 4.3% in July.

Given the often cryptic language of central bankers, Powell is unlikely to make a big-bang statement, to avoid jolting the markets.

"Central bankers find themselves in a tricky spot at present," wrote Chris Beauchamp, the chief market analyst at trading platform IG, on Monday.

"Investors may be pleased to hear talk of rate cuts, especially given the most recent US payrolls report, but Powell and his fellow officials will need to avoid the suggestion that they are worried about a sustained weakening of their respective economies," Beauchamp added.

Instead, what Powell could do is to give an overview and assessment of the current economic situation, wrote the Bank of America analysts.

"An evolution of the July FOMC language would suggest the committee is 'very close' or 'close' to the point where easing is likely to occur," wrote the Bank of America analysts.

"A further signal could be if Powell is stronger in saying that the committee wants to avoid 'unexpected weakness' in the labor market, rather than simply responding to it after it occurs," they added.

Goldman Sachs analysts expect Powell to continue his signal that cuts are coming.

"We expect Powell's message and the sideline interviews will be close to what we have been hearing over the past few weeks – that the Fed is now close to cutting interest rates but the degree of easing will depend on incoming data," Goldman Sachs analysts in a Friday note.

They wrote that they expect cuts of three consecutive 25 basis points starting in September.