Odaily Planet Daily report: Fed Chair Powell will deliver a highly anticipated public speech at the Jackson Hole Global Central Bank Symposium, his first since taking office. Currently, U.S. PCE inflation remains at 3.7%, significantly above the Fed’s 2% long-term target, and U.S. Treasury yields continue to stay elevated, while markets lack clarity on when or under what conditions the Fed might further adjust monetary policy. Powell has consistently sought to reduce forward guidance and allow markets to interpret data on their own, yet Wall Street now most wants to understand his “reaction function.” If this speech continues to focus solely on long-term issues such as productivity and demographics, bond markets may interpret the silence itself as a policy signal.
The market currently estimates a one-in-three chance of a Fed rate hike in September. Since Walsh’s appointment, the Fed has deliberately softened its traditional forward guidance, so the focus of this speech will be on how he assesses inflation and under what conditions—changes in inflation, employment, or economic growth—he might raise, cut, or hold interest rates. Market participants believe that if Walsh sends a clearer hawkish signal, it could further push up short-term rates and U.S. Treasury yields; if he avoids addressing the current policy path and instead focuses more on long-term issues such as productivity and AI, it may be interpreted by the market as a dovish signal.
In addition, AI’s impact on inflation may also be a focus of this speech. Wash has long believed that AI can boost productivity and help reduce long-term inflation, but markets believe that the current investment boom in AI is also driving up costs for construction labor and computer chips. This Jackson Hole speech could become a key moment in reshaping market expectations for September policy and the pricing of global bond markets.