Investing.com — Federal Reserve Chair Kevin Warsh delivers his first Jackson Hole keynote today, and analysts say his aversion to forward guidance makes the outcome unusually hard to call.
Deutsche Bank’s Henry Allen said in a note that the speech is a significant one given Fed chairs have often used the platform for major signals, noting former chair Jerome Powell’s acknowledgment last year of “the shifting balance of risks” set the stage for rate cuts the following month.
“With market pricing for the September Fed meeting still in the balance (35% chance of a hike), today’s speech is particularly important,” Allen wrote.
Warsh himself said in July he was undecided “whether it’s going to be a big-picture speech or whether it’s going to be a more traditional set up for all the action we’re going to have between September and December.”
Deutsche Bank’s economists see a big-picture version covering the Fed’s task forces or AI’s economic impact, while a traditional speech might involve a cleanup of the July press conference.
BCA Research’s Felix Vezina-Poirier expects the focus to land on the task force agenda rather than September guidance.
Any signal from the communications task force is more likely to outline reaction function guidance than traditional forward guidance, he said, adding that Warsh will need to reaffirm the 2% PCE target after leaving the door open to changing it in July.
Block Scholes analyst Thahbib Rahman said markets are hoping for clarity after July’s confusing press conference and with at multi-decade highs, which could underpin recent strength in risk assets.
UBS said uncertainty is likely to stay elevated regardless, with core PCE up 3.3% in July, an eighth straight month above 3%.