By Dilara Zengin and Gokhan Ergocun
WASHINGTON/ISTANBUL (AA) - Recent macroeconomic data released in the US has strengthened expectations that the Federal Reserve will cut interest rates at its September meeting as investors await Fed Chairman Jerome Powell's remarks at the Jackson Hole Economic Policy Symposium.
The symposium, hosted by the Fed's Kansas City branch and held annually since 1978, will take place this year from Aug. 21-23.
Central bankers, economists, financial market participants, academics and government representatives will gather in Jackson Hole, Wyoming to discuss important economic issues and long-term policy challenges and exchange views on these topics.
Recognized as one of the longest-running and most influential central banking conferences in the world, the symposium, with a history spanning almost half a century, will once again serve as an important platform for discussing global economic and policy issues this year.
The theme of this year's symposium is “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy.”
As labor markets undergo structural changes due to developments such as declining birth rates, an aging workforce, reduced labor mobility and the widespread adoption of artificial intelligence, participants at the symposium will address questions such as how these factors will affect labor markets in the coming years and how they will interact with fiscal and monetary policies.
The symposium, which will include presentations, panel discussions and question-and-answer sessions, will provide participants with the opportunity to engage in in-depth discussions on economic issues and policy matters.
As part of the symposium, Powell will deliver a speech Friday on the economic outlook and the review of the monetary policy framework.
His remarks ahead of the next meeting of the Fed's Federal Open Market Committee (FOMC) on Sept. 16-17 will be closely watched for clues about the future of monetary policy.
- Recent data strengthens expectations that Fed may cut rate
Faced with pressure from US President Donald Trump to cut interest rates, Powell said in a statement following the central bank's July meeting that no decision had been made regarding a rate cut in September.
Powell emphasized that they would take into account all information and data available at the time when making a decision for the September meeting.
In July, the Fed kept its policy interest rate unchanged at 4.25%-4.50% for the fifth consecutive meeting.
Recent data, particularly weak employment data in the US, has strengthened expectations that the Fed may resume interest rate cuts in September.
Non-farm payroll employment in the country increased by 73,000 in July, falling short of expectations, while the unemployment rate increased to 4.2% from 4.1% the previous month.
While the data pointed to a weakening in the labor market, consumer inflation data showed that price pressures stemming from tariffs remained limited for now.
The Consumer Price Index (CPI) rose by 0.2% month-on-month in July, in line with expectations, and by 2.7% year-on-year, below expectations.
However, the Producer Price Index (PPI), which rose by 0.9% on a monthly basis and 3.3% on an annual basis in July, exceeding expectations, intensified concerns about inflation. Following the producer inflation data, expectations that the Fed would cut interest rates in September weakened somewhat but continued.
- ‘Powell to more or less confirm the Fed will resume cutting interest rates’
“I would expect Chair Powell to more or less confirm the Fed will resume cutting interest rates at next month’s FOMC meeting,” Mark Zandi, chief economist at Moody's Analytics, told Anadolu.
Zandi noted that Powell will point to the weakening job market for why the Fed should resume “normalizing” interest rates.
He stressed that Powell will also argue that while inflation is above target and will likely accelerate in the coming months due to the higher tariffs, this will likely prove to be a one-off increase in prices as inflation expectations remain anchored.
“Given this is his last Jackson Hole as Chair, he may also use the opportunity to provide an assessment of his legacy as Fed chair. And he may even weigh in on the critical importance for the Fed to remain independent,” he said.
- ‘Fed is in a tough position as inflation remains above target’
Ryan Sweet, chief economist at Oxford Economics, noted that it won’t be a duplicate of last year, when Powell took a dovish shift, and clearly signaled that the Fed was ready to cut at its next meeting.
“This year, Powell will likely reiterate that every meeting is ‘live’ but won’t be committal on September because there will be new data on inflation and employment before the September meeting,” Sweet said.
Pointing out that the Fed is in a tough position as inflation remains above target and downside risks to the labor market are intensifying, he commented: “Whether they cut or not in September will likely hinge on data that Powell won’t have in hand at his Jackson Hole speech.”
- ‘Powell will not reveal rate decision at Jackson Hole’
Max Gillman, a professor of economic history at the University of Missouri, said: "As markets anticipate any light on whether interest rates will be cut in September, I expect Powell to be ambiguous on the issue.”
"Given the political pressure on him, I do not expect him to say explicitly that he will cut interest rates."
He will acknowledge the lower new jobs numbers that have been revised downwards while saying that the unemployment rate remains low at 4.2% and that inflation is somewhat higher, he stressed.
He will simply state the tradeoffs of a weaker job market and a slightly higher inflation rate, leaving him the option of cutting rates or not cutting rates, Gillman said.
"I do not believe tariffs will cause any sustained inflation, and therefore I believe the Fed should cut interest rates in September. I also expect that they will do so, but that Powell will not reveal that at Jackson Hole," he added.