The media has a tendency to treat everything like a horse race, even the framework under which the Fed makes monetary policy.The reality is that when it comes to the travails of the Fed, it labours like a turtle. Indeed, the monetary authorities don’t know the future, let alone what is going on now. That is why they rarely change their modus operandi. Despite pressure from the media, Powell did not make any aggressive statements at Jackson Hole in order to avoid any chaotic shock. Instead, he delivered a prepared “something for everyone” speech designed not to rock the boat, dismissive of raising the inflation target above 2.0% or of sharing any view as to what the neutral rate of interest might be. Bottom line is that the Fed will proceed carefully, hold the policy rate constant and await further data. According to the CME FedWatch Tool, which tracks moves in futures, traders put the odds of the Fed holding steady at the September 19-20 meeting at 83%, a 4% point increase from before Powell’s speech, suggesting that they neither expect a controversial job report nor bad personal spending numbers this week, and believe him when he said that the Fed will not hike at the next meeting and proceed carefully in the future. The S&P 500 closed at 4406, up 36 points or 0.8%.
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By Hubert Marleau