24th August 2024 marks a crucial date in the American financial calendar, as markets and investors await news on possible interest rate cuts in September by Fed Chairman Jerome Powell. Powell is set to address his colleagues from the central back in an economic symposium in Jackson Hole, Wyoming, this Friday. Members of the Fed will gather at Jackson Hole to discuss the extent of inevitable rate cuts as a result of cooled inflation and a dull labor market.
The Fed infamously announced to keep rates unchanged last August in its efforts to dampen inflation in the US, thereby maintaining the historic range of 5.25% to 5.50%. A year later, the Fed has managed to bring inflation to 2% levels. Consequently, unemployment rose considerably during this period as American spending shrank to tame rising prices. According to policy minutes released on Wednesday, the “vast majority” of those at the meeting agreed that “it would be likely” to cut rates in September if the data on prices and jobs cooperated.
We have posted the minutes from the #FOMC meeting held July 30-31, 2024: https://t.co/Kx8Co2aDZM
— Federal Reserve (@federalreserve) August 21, 2024
During the July 31st press conference following the Fed’s last meeting, Powell entertained the likelihood of a 25 basis point cut in September. However, revisions from the Labour Department echo the possibility of a 50 basis point as the US employed 818,000 fewer as compared to a similar report published in March 2024. This data reflects the urgency to reform US monetary policy, which only sees drastic revisions when key economic indicators take a nosedive, crippling millions of Americans. In July, the US unemployment rate rose to 4.3%, its highest level since October 2021. In accordance with the Fed’s dual mandate to maintain stable inflation and grow employment levels, possible rate cuts must stabilize the economy without triggering another bout of inflation.
Tech stocks led by Nvidia saw a tumble on Thursday in anticipation of Powell’s announcement in Jackson Hole on Friday. The S&P 500 fell about 0.9% while the tech-heavy Nasdaq Composite fell almost 1.7%, led by a drop in shares of AI chip giant Nvidia.
Fed watchers may have to wait beyond this week for more confirmation of what may transpire in September. Of particular importance will be a jobs report for August released on 6th September.
