Fed Minutes Set Up “Big Friday” in Jackson Hole

Today’s Fed phrases of the day is a tie between “midcycle adjustment” and “part of a recalibration” which were descriptions of the recent rate cut contained in today’s release of the Fed minutes. Another sentence indicating the rate cut was not part of a “pre-set course” piled on to the realization that the Fed is still watching the data and has not planned a series of rate cuts. The bond market “spoke” by re-inverting the yield curve (the 2 year and 10 year inverted again), indicating fear that the Fed may not act fast enough to ward off a potential recession. Every word and mannerism of Fed Chair Powell’s speech Friday at the annual Jackson Hole symposium will be parsed and analyzed. The bond and stock markets have priced in a September rate cut. However, the bar may be low: if he doesn’t rule out further rate cuts that may be dovish enough to keep markets “off the edge”. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners