Powell’s Twin Pivots: The Federal Reserve’s September Watchdates

Jerome Powell’s recent speech has made Sept. 6 and Sept. 18 crucial for U.S. monetary policy. The upcoming dates will focus on the unemployment rate influencing the Fed's decisions. Sept. 6 will release August non-farm payrolls, while Sept. 18 will bring an anticipated interest rate cut and updated economic projections.

Jerome Powell's Jackson Hole speech has turned Sept. 6 and Sept. 18 into the most pivotal dates for U.S. monetary policy in recent years. Both days will focus on the Federal Reserve's new guiding metric: the unemployment rate. Sept. 6 will see the release of the August non-farm payrolls report, whereas Sept. 18 will bring a much-anticipated interest rate cut and updated Summary of Economic Projections (SEP).

The Fed is expected to cut rates on Sept. 18, as Powell indicated at Jackson Hole. However, questions remain regarding whether the easing cycle will begin with a 25-basis-point or a 50-basis-point cut, and the extent to which policy will be loosened in the coming months. The outcome of these key dates will provide investors with clearer guidance.

Powell made two significant pivots in his Jackson Hole address. Firstly, he signaled an imminent rate cut. Secondly, he made it clear that unemployment rather than inflation will now be the main factor influencing policy decisions. This shift indicates that the current unemployment rate of 4.3% can potentially trigger a policy response if it crosses a certain threshold.

By September, markets, the public, and policymakers will focus keenly on these developments, especially with the U.S. presidential election in full swing. A rise in the unemployment rate could prompt a significant policy shift, reiterating the delicate balance the Fed must maintain.

With traders anticipating substantial rate cuts by year-end, the Federal Reserve faces a challenging navigation path. The direction taken by the Fed will depend heavily on whether the U.S. economy genuinely enters a recession or manages a 'soft landing.'

(With inputs from agencies.)