Fed Chair Jerome Powell Expected to Set Stage for September Rate Cut

More than two and one-half years after starting what became an historic monetary tightening cycle, U.S. Federal Reserve Chairman Jerome Powell is widely anticipated to signal that the central bank will imminently begin to ease policy.

Powell’s keynote speech at the Kansas City Fed’s Jackson Hole Economic Symposium is scheduled for Friday at 10 am ET and past Fed chairs – including Powell – have often used this forum to tip off important shifts in central bank policy.

As often occurs, markets have been way ahead of the Fed, with traders weeks ago having priced in a 100% chance of at least a 25 basis point rate cut at the bank’s September meeting. Yesterday’s release of the FOMC minutes from the Fed’s July policy meeting also likely took away some of tomorrow’s thunder, saying the “vast majority” of participants saw a September rate cut as likely appropriate.

Beyond tipping the September cut, most anticipate Powell to flag a cautious approach to easing policy, i.e. signaling that the Fed will trim just 25 basis points at its September meeting and advising markets not to expect an unbroken series of rate cuts at future meetings.

Despite a sizable stumble from mid-July into early August, U.S. stock markets have mostly been in bull mode in the lead up to the coming easing cycle. The S&P 500 is only about 1% below its record high hit in early July and the Nasdaq a bit more than 4% below its peak. Gold has been on a run as well, touching a record high of $2,566 earlier this week.

Bond markets are in a good mood too, with the 10-year U.S. Treasury yield yesterday dropping to a multi-year low of 3.77%.

Bitcoin (BTC), however, has been unable to get out of its own way. Though recovering nicely from the early August panic that briefly took prices below $50,000, bitcoin at its current $60,800 is far below an all-time high of around $73,500 touched all the way back in March.

The world’s largest crypto has seemingly been ignoring other positive catalysts as well, including growing institutional interest and continued inflows into the spot ETFs. Bitcoin this week also got potential good news on the regulatory front with ABC News reporting that crypto-friendly Robert Kennedy Jr. could drop out of the presidential race on Friday and endorse crypto-friendly GOP candidate Donald Trump. On the Democratic side, a top Kamala Harris campaign official suggested a Harris administration would be far friendlier to the crypto industry than the Biden regime.