The Federal Reserve keeps telling the market it’s serious about containing inflation, even if it means damage elsewhere. But the market is still having a hard time taking it seriously. So it’s up to Fed Chair Jerome Powell next week to tighten things up further. The central bank leader will address his colleagues Friday at 10 a.m. ET at the Fed’s annual symposium in Jackson Hole, Wyoming. This year’s focus on the Kansas City Fed-sponsored event will be “Reassessing Constraints on the Economy and Policy.” Market participants will be looking for clear guidance on how far policymakers want to push inflation, what the criteria will be and what the ramifications of the struggle may be. “The market is as dependent on data as the Fed, if not more. [The market wants] just some clarity on how he sees price stability,” said Quincy Krosby, chief equity strategist at LPL Financial. The market remained sunny nonetheless. delicate possible approach in its inflation battle, which seems to contradict statements by multiple Fed officials who have said inflation is the main challenge right now and requires action. Street Journal would like to see a third consecutive rate hike Minneapolis Fed President Neel Kashkari said on Thursday that he is committed to fighting inflation and isn’t sure it won’t come at the cost of a recession.And Mary Daly , president of the San Francisco Fed, said she expects the Fed to keep interest rates stable once they reach restrictive levels — cons count to market expectations for a rate cut in 2023. However, markets have continued to rise even as Fed officials warn of more rate hikes, as was the case with Governor Michelle Bowman, who said earlier this month that rate hikes are “of the same order of magnitude.” “probably needed. “Risk markets seem determined to read a meek message in Fed messages that we think is just not there.” Citigroup economist Andrew Hollenhorst said in a note this week. “A committee that values its ‘determination’ in fighting inflation is unlikely to soften substantially as long as underlying inflation remains well above target and does not slow down convincingly.” But the week ended on a sour note, and it could be because comments from Bullard and others started to resonate with investors. “This year’s Jackson Hole Symposium comes at a pivotal time for monetary policy,” said Matthew Luzzetti, chief economist at Deutsche Bank, in a note to clients. “Officials are planning how to downshift from this ‘unusual’ pace of tightening in a way that preserves the credibility of fighting inflation while preserving the prospects for a soft landing.” The warnings are echoing around Wall Street. Bank of America chief equity strategist Michael Hartnett warned that the market’s current surge is likely just a bear rally that can be reversed as investors realize the Fed still has a lot of work to do in the area. of inflation. The bank’s economists said even the recent spate of better-than-expected news on jobs and retail spending should be viewed with caution, as “stronger incoming data reduces the likelihood that the economy will slide into recession in the near future, but It likely increases the risk of a hard landing over time, as this could mean the Fed tightens more.” Market prices tilted towards a half-point rate hike next month, and The Street doesn’t expect Powell to give any clear signals on the direction he’s leaning. “How far are you willing to go until you reach price stability?” LPL’s Krosby said. “That’s ultimately what the market wants to know, and I’m not sure it’s willing to tell us.”
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