When Federal Reserve Chair Jerome Powell spoke this time last year at the Kansas City Fed symposium in Wyoming, he warned that interest rate hikes would mean “pain” for US households. The Dow Jones Industrial Average index sank 1,000 points in response.
Will history repeat itself?
Some investors say they expect Powell to reiterate the Fed’s commitment to tamping down inflation while acknowledging the progress that’s been made.
But the market is unlikely to react quite as dramatically this time around, they say, partly because Powell’s speech will likely be similar to the kind of commentary he has delivered following recent policy meetings.
“Expect a balanced assessment with no abrupt hawkishness, but no mission accomplished: The Fed has not come this far to let inflation slip out of its grasp,” wrote Evercore ISI strategists in a note on Tuesday.
While it’s unclear if the Fed will raise interest rates again this year — Powell has signaled at least one more increase — Wall Street has the end of the central bank’s aggressive rate-hiking campaign in its sights. That’s a key difference from last year.
“In August of 2022, Powell knew the Fed had several more rate hikes to go. Today, the Fed may be near the end of this hiking cycle. That is going to require him to be a lot more nuanced in his speech,” said Tom Graff, head of investments at Facet.
Traders see a roughly 85% chance that the Fed will hold rates steady at its next meeting, in September, according to the CME FedWatch Tool. Expectations for whether the central bank will pause or raise rates for the rest of the year are more divided, with narrow majorities for no change in November or December.