In his remarks at the Jackson Hole Symposium on Friday evening, August 22, US Federal Reserve Chairman Jerome Powell indicated that the underlying outlook and the changing balance of risks require an adjustment in our monetary policy stance, emphasizing that inflation risks remain elevated and that tariff-related inflationary pressures are now evident.
In his speech, which addressed monetary policy more clearly, Powell indicated that the Fed will not allow a one-time rate hike to become a persistent problem.
Markets interpreted Powell’s remarks as a near-direct hint that the Fed will proceed with a 25 basis point rate cut in September for the first time this year. Markets are now pricing in a near-certainty of a rate cut at the September meeting of more than 90%, compared to less than 85% before the speech, and pricing in another rate cut in December of more than 70%. Markets reacted positively, with US stocks rising as risk appetite increased, with the Dow Jones Industrial Average rising more than 2%, and the Nasdaq and S&P 500 rising more than 1.5%.
The US dollar lost more than 1% after Powell’s remarks, trading at 97.67, while all currencies (the yen, euro, pound, franc, and commodity-linked currencies) rose by more than 100 points.
The yellow metal, in turn, rose nearly 1%, benefiting from the decline in the US dollar, testing two-week highs of $3,378 per ounce.
Ethereum led the gains among cryptocurrencies, rising more than 9% to recoup losses since the beginning of the week, while Bitcoin rose 3.50%, trading at $116,500.