• Powell: My confidence has grown that inflation is on the path to 2%
• Powell: We don't seek or welcome further labor market cooling
• Powell: "The time has come for policy to adjust"
• "The timing and pace of rate cuts will depend on incoming data," says Powell

Federal Reserve Chair Jerome Powell delivered a pivotal speech on Friday at the Kansas City Fed's annual economic conference in Jackson Hole, Wyoming, laying the foundations for interest rate cuts.

Powell stated in his highly anticipated keynote address that "the time has come for policy to adjust."

Powell outlined that the "direction of travel is clear" regarding future adjustments but noted that the "timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."

Addressing inflation, Powell expressed growing confidence that "inflation is on a sustainable path back to 2 percent," while on the employment front, he said, "It seems unlikely that the labor market will be a source of elevated inflationary pressures anytime soon."

The Fed Chair also clarified that the Fed does not seek or welcome further cooling in labor market conditions. However, Powell told listeners that "the inflation and labor market data show an evolving situation"

Powell also discussed the evolving economic landscape, stating that "the upside risks to inflation have diminished," and the "downside risks to employment have increased."

In his closing remarks, Powell assured that the Fed would "do everything we can to support a strong labor market as we make further progress toward price stability."

Overall, much of Powell's speech focused on what caused the inflation that led to the aggressive series of rate hikes from March 2022 through July 2023, taking a look back at the policy decisions taken during the pandemic period.

Powell's Jackson Hole Speech 'will be key to fine-tune policy expectations'

Fed Chair Jerome Powell is set to deliver a highly anticipated speech at the annual Jackson Hole symposium in Wyoming's Grand Teton National Park this Friday.

Market participants are eagerly awaiting his remarks, which are expected to provide insights into the Federal Reserve's future monetary policy direction amidst ongoing economic uncertainties.

The speech is likely to influence the market's perception of future monetary policy and the economy.

With weakening U.S. economic data prompting the Federal Reserve to cut interest rates, there is a growing belief that the Fed will do so at its next meeting in September.  

In a note to clients this week, analysts at Barclays told investors that they believe "Fed speak at Jackson Hole will be key to fine-tune policy expectations."

"Powell's speech at Jackson Hole today may not change the script for markets much. However, a lot of 'good' rate cut news is arguably baked into rates and equity markets already, with four Fed cuts being priced by OIS swaps before year-end," they added.

Meanwhile, Goldman Sachs expects the speech from Powell and his subsequent interviews to highlight data dependency and a cautious approach to rate cuts.

The investment bank expects Powell to reaffirm the Fed's preparedness to swiftly respond to deteriorating economic conditions but refrain from committing to aggressive easing without further data.

"While the academic part of the symposium has the potential to impact the long-run direction of policy, the side interviews should shed more light on immediate policy questions, analysts at the influential investment bank said.