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Investing.com -- Markets are turning their attention to the Federal Reserve’s annual Jackson Hole symposium, with investors looking to Fed Chair Jerome Powell’s August 22 speech for signals on policy direction, according to Bank of America.
The symposium runs from August 21-23 under the theme “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy.”
Powell is scheduled to speak at 10 a.m. ET on August 22 in remarks titled “Economic Outlook and Framework Review.”
BofA said that “Powell’s reaction function to recent stagflationary data will be key.”
“Will he be spooked by jobs revisions or lean into the labor supply slowdown? US rates team doesn’t think Powell will sound as dovish as market expects,” stated the bank.
Jackson Hole has often drawn scrutiny from investors because it comes during a long period between policy meetings and sometimes serves as a venue for broader framework changes.
As BofA noted, “There are a full seven weeks between the July and September meetings this year. This period includes two NFP & CPI prints. Therefore, markets are likely to treat Jackson Hole as a ‘mini-meeting.’”
BofA analysts expect Powell to be more balanced than markets are pricing. The bank wrote that Powell’s comments may push back against certainty over a September rate cut.
The firm recommends “tactically paying Sep FOMC OIS ahead of a less dovish vs expected Powell at Jackson Hole.”
“Historically, Jackson Hole has not been a game changer for the US rates market, especially under Chair Powell,” stated BofA. “Typically rates modestly decline after Jackson Hole. These moves usually reverse in the 10 business days after the event though ’24 was an exception.”
The Fed is also set to announce results from its monetary policy framework review, with BofA expecting the chapter on flexible average inflation targeting to close. Still, analysts cautioned: “We do not expect the framework review to be materially market-moving.”