Fed Minutes and Jackson Hole: What Markets Are Watching

The recent financial market movements align with rising expectations that the US Federal Reserve may make its first interest rate cut during its meeting on September 18, 2024. This sentiment has been fueled by a slight drop in inflation, which recently eased to 2.9% from the previous 3%. As a result, close monitoring of all upcoming economic data and reports is crucial in the lead-up to the Fed’s meeting, as these indicators will either validate these expectations or reveal surprises that could prompt the Fed to maintain its tight monetary policy. 

The minutes from the Federal Reserve’s most recent meeting are set to be released today, Wednesday, at 9 p.m. Jordan time. These minutes will outline the reasons behind the decision to keep interest rates at 5.5%, the highest level in 22 years. Investors will be eager to analyze the details and gain insights into the economic and financial factors influencing the committee's decision. This could lead to significant price fluctuations in the financial markets both upward and downward as per analysts' expectations. 

The US Federal Reserve has previously stated that inflation is trending in the right direction, but it remains cautious and wants to ensure it continues to move toward the 2% target. This caution means additional data needs to be monitored to build confidence before deciding on any rate cuts. As a result, the details from the last meeting will likely be a key factor influencing market movements in today’s session.

This Thursday and Friday, attention will turn to the Jackson Hole symposium, a key event for central bankers. On Friday, Federal Reserve Chairman Jerome Powell will discuss interest rates and the economy, which is likely to trigger market fluctuations, as is typically the case when Powell speaks. Powell's speech is expected to signal to the markets whether expectations for a rate cut in September are justified.

The attached chart (Figure 1) illustrates the movement of the US dollar index, which tracks the currency’s strength against a basket of major currencies. Recently, the index has dropped below key support levels near 102. As of this report, it is hovering around 101.5, with the next significant support near 100.6. This chart suggests that the current movement of the US dollar increases the likelihood of the Federal Reserve adopting a more accommodative monetary policy unless the dollar rebounds and trades above the 102 level again

Figure 1: DXY, 1W time frame, Tradingview