Caixin reported on August 16th (Editor Bian Chun): The annual Jackson Hole Conference will be held at Jackson Lake Lodge in Grand Teton National Park, Wyoming, USA from Thursday to Saturday (August 22-24).

At the current moment, when global economic recession concerns prevail and global central banks are at a policy turning point, this event is highly anticipated. Fed Chair Powell's speech will undoubtedly become the market focus.

The Jackson Hole conference is one of the oldest central bank meetings in the world and is also known as the 'Davos Forum for Central Bank Governors'. Since 1978, the Kansas Federal Reserve has been responsible for hosting this annual economic policy conference. Central bank officials, Nobel laureates, and top scholars from around the world gather in this small Wyoming town every August and September to discuss the most pressing issues related to the global economy and monetary policy.

It will set the tone for the rate cut in September.

According to the updated schedule released by the Fed on Thursday, Powell will deliver his keynote speech at the Jackson Hole Conference at 10:00 a.m. Eastern Time on August 23 (10:00 p.m. Beijing Time on August 23). This year's conference continues the tradition of having the Fed Chair deliver a keynote speech during the three-day central bank conference.

This conference will provide Powell with an opportunity to give a fresh assessment of the trajectory of the US economy and the outlook for monetary policy between the Fed's policy meetings in July and September. It is widely expected that Powell will give clues on monetary policy when he delivers the opening remarks at the Jackson Hole Conference.

To combat high inflation, the Fed began raising interest rates in March 2022, pushing the benchmark rate from near zero to the current range of 5.25%-5.50%. Rates have been at this level since July 2023.

Given the past few months of cooling U.S. inflation and slowing labor markets, financial markets widely expect the Fed to start a round of rate cuts at its meeting on September 17-18.

However, there is still disagreement in the market regarding the scope of the rate cut. Although most economists predict that the Fed will cut interest rates by 25 basis points in September, there are also some insiders who predict a larger cut of 50 basis points. Some even call for an early rate cut by the Fed.

Given the mixed economic data recently released in the US, people have been oscillating between the ideas of 'the US economy will fall into recession' and 'the US economy will not fall into recession'. This is also the main reason why there is disagreement in the market regarding the prospects of a rate cut.

Earlier this month, the unexpected coldness of the US non-farm payroll report in July was announced. The report showed that the job market had deteriorated sharply, and the unemployment rate had risen to the highest level in nearly three years. In addition, several economic indicators, including the Consumer Price Index (CPI) and the Producer Price Index (PPI) for July, were lower than expected, pointing to a slowdown in US inflation and paving the way for a rate cut by the Fed.

However, on Thursday, the US retail sales and initial jobless claims data were both better than expected, easing concerns about an economic recession and bringing the prospect of a soft landing back into view. This seemed to ease the urgency for a large rate cut by the Fed.

Economists say that Powell will lay the groundwork for a rate cut in September at the Jackson Hole Symposium next week, with the actual rate cut expected to be determined by the August employment data to be released a week later.

Krishna Guha, Vice Chairman of Evercore ISI, stated that Powell will set the tone for future monetary easing policies and will tend to be 'active' rather than 'passive' with regard to the rate cut. The specific details will not be available until the release of the August employment data on September 6.

'The Fed is now primarily concerned with employment data, not inflation data, and the upcoming employment data will determine how actively the Fed will push for a rate cut.' Guha said.

Will the market face a huge shock?

For investors, Powell's speech at the Jackson Hole Conference will be their most pressing concern. It is worth noting that the US stock market often experiences huge shocks during Powell's speeches.

For example, in August 2022, Powell gave a hawkish speech at Jackson Hole, saying that some 'pain' was needed to quell inflation and reiterating his tough stance on inflation. This hawkish speech directly hit the US stock market, with the Dow plummeting more than 1,000 points, a drop of 3%, the S&P 500 Index falling 3.4%, and the Nasdaq falling nearly 4%.

Over the past month, the US stock market has experienced increased volatility. Last Monday, the US stock market suffered its most devastating day in more than two years amid a global market sell-off. However, the S&P 500 Index has still risen nearly 17% this year.